\ 


UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


TREASURY  DEPARTMENT 

UNITED  STATES  INTERNAL  REVENUE 


J/5,        l^i^^YnJ^     .^^v  -   ■ -•  ^.     ^  -.  y^c<^ 

REGULATIONS  64 

(1922  EDITION) 

RELATING  TO  THE 

CAPITAL  STOCK  TAX 


UNDER  THE 


REVENUE  ACT  OF  1921 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 

1922 


s 

Tntr  64- ■ 
19  Z^ 


I  REGULATIONS 


fiELATING    T0    THE 

CAPITAL  STOCK  TAX 

UNDEIJ 

TITLE  X  OF  THE  REVENUE  ACT  OF  1921. 


CONTENTS. 

Page. 

Article  1.  The  law ^ 

Section  1000   (a).  Effective  date 1 

Article  2.  Diie  date  of  tax 1 

Section  1.  Corporations  defined  and  disting-uishetl 1 

Article     3.  Corporations ^ 

4.  Associations  and  joint-stock  companies 1 

5.  Limited  partnershij^s  as  corporations 2 

6.  Limited  partnerships  as  partnerships 2 

7.  Partnership   banks 2 

8.  Massachusetts  trusts : 2 

9.  Domestic  corporations 3 

10.  Foreign  corporations 3 

Section  1000  (a).    (1)   Tax  on  domestic  tjoi-porations 3 

Article  11.  Basis  of  the  tax  :  "  Carrying  on  or  doing  business  " 3 

12.  "Carrying  on  or  doing  business"  illustrated 4 

13.  Not  "  doing  tmsiness  " 6 

14.  Computation  of  tax G 

15.  Fair  average  valiie  of  capital  stock 7 

16.  Surplus  and -undivided  profits 8 

Section  1300.  ] ,.  ^  o 

1307.  P'"™' 

Article  17.  Return  by  domestic  corporation S 

18.  Iteturn  by  affiliated  corporation 8 

19.  Verification  of  return 9 

20.  Time  for  making  return 'J 

21.  Tentative  return 1^ 

Section  1000   (a).    (2)   Tax  on  foreign  corporations 10 

Article  22.  Basis  of  the  tax 10 

23.  Capital  employed  in  the  United  States H 

24.  Capital  employed  in  the  United  States  Illustrated 11 

25.  Return  by  foreign  coi'poration 12 

26.  Computation  of  tax ^2 

27.  Measure  of  tax 12 

III 


IV  CONTENTS. 

Page. 

Section  10(X)   (b).  Exemption  from  tax 12 

Article  28.  Corporation  not  in  business  durini^  procedinj^  year 12 

29.  Oriianiziitions  and  insurance  companies  exempt 13 

30.  Claims  for  exemption '. 19 

31.  Return  by  corporation  claiming  exemption 19 

Section  229.  Election  to  be  taxed  as  a  corporation 19 

Article  32.  Election  to  be  taxed  as  a  corporation 20 

Section  1000.    (c)    Returns  public  records • 20 

Article  33.  Inspection    of   returns 21 

34.  No    authority    for   credit    of   excess    payment    of   capital 

stock  tax : 21 

Section  13(X).  Laws   made  applicable 21 

1308.  Examination  of  books  and  witnesses l 22 

1301.  Method  of  collecting  tax 22 

Article  35.  Time  for  payment  of  tax 22 

36.  Abatement  and  refund  of  taxes 23 

Section  1315.  Refunds 23 

1323.  Fraudulent  returns 23 

1325.  Medium  of  payment  of  tax 23 

Article  37.  Payment  of  tax  by  uncertified  checks 23 

38.  Procedure  Avith  respect  to  dishonored  checks 24 

Section  1004.  Penalty  for  doing  business  without  payment  of  tax 24 

Article  39.  Doing  business  without  payment  of  tax 24 

Section  1302.  Penalties 24 

Article  40.  Penalty  for  nonpayment  of  tax 25 

41.  Penalties  for  failure  to  make  return  and  for  false  return.  25 

Section  1309.  Unnecessary   examinations 26 

1310.  Jurisdiction  of  courts 26 

1311.  Amendments   to   Revised    Statutes 27 

Sec.  3164.  Collector  to  report  willful  violations 27 

3165.  Powers  of  revenue  officers 27 

3167.  I'enalties  for  unkiwful  disclosures 27 

3172.  Canvass  for  taxable  persons  and  objects__  27 

3173.  Responsibilities  of  persons  liable  to  tax 28 

3170.  Delinquent  returns 29 

1312.  Final  determinations  and  assessments 29 

1313.  Administrative  review 30 

1314.  Retroactive   regulations 30 

Article  42.  Section  3228  R.  S.   (refunds)    retroactive 30 

Section  1316.  Time  for  refund  of  capital  stock  tax 30 

1318.1 

1319. 

1320. 

1321., 

1322.  Assessments 31 

Article  43.  Section  1322  R.  S.  (assessments)  retroactive 31 

Section  1324.  Interest  on  refimds  and  judgments 32 

l.':!03.  Authority  for  regulations r —  32 

1400.  Repeals 32 

Article  44.  Promulgation  of  regulations 33 


>  Limitations  upon  suits  and  prosecutions '-  30-31 


CAPITAL  STOCK  TAX. 


Article  1.  The  law. — The  main  provisions  of  existing  law  with 
respect  to  this  tax  are  embodied  in  section  1000  of  the  Revenue  Act 
of  1921,  referred  to  hereinafter  as  the  act. 

EFFECTIVE  DATE. 

Sec.  1000.  (a)  That  on  and  after  July  1,  1922,  in  lieu  of  the  tax  im- 
posed by  section  1000  of  the  Revenue  Act  of  1918 — 

Art.  2.  Due  date  of  tax. — The  act  was  approved  November  23,  1921, 
but  the  tax  is  effective  from  July  1,  1922,  except  upon  the  incorpora- 
tion of  an  individual  or  partnership  business  (see  art.  32).  This  is 
a  special  tax  and  like  all  special  taxes  is  due  and  payable  annually 
in  advance  from  July  1  of  each  year.  No  portion  of  the  tax  so  paid 
is  refundable  to  a  corporation  which  ceases  to  do  business  during 
the  year, 

CORPORATIONS    DEFINED   AND    DISTINGUISHED. 

Section  2.  That  when  used  in  this  act — 

:|:  $  ^  H«  ^  4:  :^ 

•The  term  "  corporation  "  includes  associations,  joint-stock  companies,  and 

*     *     *     * 

The  term  "  domestic "  when  applied  to  a  corporation  or  partnership 
means  created  or  organized  in  the  United  States ; 

Tlie  term  "  foreign  "  when  applied  to  a  corporation  or  partnership  means 
created  or  organized  outside  the  United  States ; 

The  term  "  United  States  "  when  used  in  a  geographical  sense  includes 
only  the  States,  the  Territories  of  Alaska  and  Hawaii,  and  the  District 
of  Columbia.  • 

Art.  3.  Corporations. — The  term  "corporation"  includes  associa- 
tions and  joint-stock  companies,  whether  created  by  statute  or  by  con- 
tract, but  not  partnerships,  properly  so  called.  It  is  immaterial 
whether  the  companies  were  organized  for  profit  or  have  a  capital 
stock  represented  by  shares. 

Art.  4.  Associations  and  joint-stock  companies. — Associations  and 
joint-stock  companies  include  organizations,  b}?-  whatever  name 
known,  which  act  or  do  business  in  an  organized  capacity,  whether 
created  under  and  pursuant  to  State  laws,  agreements,  declarations 

1 


2  CAPITAL  STOCK    TAX   TJISTDER   EKVENUE   ACT   OF    1921. 

of  trust,  or  otherwise,  the  net  income  of  which,  if  •^n\y,  is  distributable 
amonjx  the  members  or  shareholders  on  the  basis  of  the  capital  stock 
held  by  each.  or.  whei-e  there  is  no  capital  stoclc,  on  the  basis  of  the 
proportionate  share  of  capital  which  each  has  or  has  invested  in  the 
business  or  property  of  the  oroanization.  But  see  articles  5,  G,  7,  8. 
An  oraanization,  tlte  membeTship  intei'ests  in  wiiich  are  transferable 
without  the  consent  of  all  of  the  members,  however  the  transfer  may 
be  otherwise  restricted,  and  the  business  of  which  is  conducted  by 
trustees  «r  daireicfcoii's  and  offic&rs  withoa.it  the  active  participation  of 
ail  tlie  members  as  sueii,  is  -an  -assotaatioii. 

Art.  5.  limited  partnerships  ■&&  eorporations. — Part-nersliips  with 
limited  liability  or  partnership  associations  authorized  b}^  the  statutes 
of  Pennsylvania  and  a  few  otlier  States  are  only  nominally  partner- 
ships. Such  so-called  limited  partnerships,  offering  opportunity  for 
limiting-  the  liability  of  all  the  members,  providing  for  the  trans- 
ferability of  23artnership  shares,  and  capaljle  of  holding  real  estate 
and  bringing  -suit  in  the  common  name,  are  naore  truly  ^corporations 
th'an  partnerships,  and  are  taxable  as  corpoTatioRS.  In  all  doulitf ul 
cases  limited  partnerships  will  be  treated  as  corporations  unless  they 
suliniit  satisfactory  proof  tliat  tliey  tire  not  in  effect  so  orgfinissed. 
Michigan  partnership  associations  are  corporations.  Tli«  liability  of 
Virginia  limited  partnerships  is  determined  in  ■each  -case  from  a 
consideration  of  the  certificate  of  partnership  and  all  pertinent  facts 
relative  thereto. 

Art.  6.  Limited  partnerships  as  partnerships. — So-called  limited 
partnerships  of  the  type  authorized  by  the  statutes  of  New  York  and 
most  of  the  States  are  partnerships  and  not  corporations  within  the 
meaning  of  the  statute.  Sa:ich  limited  partnerships  whi-dk  can  not 
limit  the  liability  of  the  general  partners,  although  the  special 
]3artners  enjoy  limited  liability  so  long  as  they  observe  the  statutory 
conditions,  which  are  dissolved  by  the  d^ath  or  transfer  of  tlie  in- 
terest of  a  general  partner,  scad  which  can  not  hold  real  estate  or  sue 
in  the  partnership  name,  are  so  like  common  kw  pfirtner ships  that 
the}^  can  not  be  differentiated  therefrom  for  tax  purposes.  Michigan 
ancl  Illinois  limited  partnerships  are  partnerships.  California  special 
partnerships  are  partnerships. 

ApwT,  7.  Partnership  banks. — A  partnership  bank,  conducted  like  a 
corporation  and  so  organized  that  the  interests  of  its  members  may  be 
transferred  without  the  consent  of  the  other  members,  is  a  joint- 
stock  company  or  association  within  the  meaning  of  the  statute.  A 
partnership  bank,  the  interests  of  whose  members  can  not  be  so 
transferred,  is  a  partnership. 

Art.  8.  Massachusetts  trusts. — The  test  of  liabilit}^  in  all  cases  in- 
volving trusts  of  the  Massachusetts  type  is  whether  the  cestuis  que 


CAPITAL  STOCK   TAX  inNDER  KEVEXUE   ACT  OF   1921.  3 

trustent  have  by  the  terms  of  the  trast  agreement  a  voice  in  the' 
manasrement  or  control  of  the  trust.  Where  the  trustees  are  in  com- 
plete  control  of  the  business,  the  beneficiaries  having  no'  control  ex- 
cept the  right  of  filling  vacancies  among  the  trustees  or  of  consent- 
ing to  a  modification  of  the  terms  of  the  trust  or  of  dissolving  the 
trust,  no  association  exists.  If,  however,  the  cestuis  que  trustent  have 
a  voice  in  the  control  or  management  of  the  business  of  the  trust, 
whether  through  the  right  to  elect  trustees  periodically  or  to  remove 
the  trustees  or  to  restrict  the  trustees  as  to  the  management  of  the 
truM  or  otherwise,  the  trust  is  an  association  within  the  meaning 
of  the  statute.  "N-^Tiere  the  trustees  hold  in  their  own  right  a  suffi- 
cient number  of  the  certificates  of  beneficial  interest  to  constitute 
control  as  between  the  beneficiaries,  the  trust  will  be  held  to  be  an 
association  regardless  of  the  powers  conferred  upon  the  trustee  by 
the  instrument  creating  the  trust. 

Akt.  9.  Domestic  corporations. — A  domestic  corijoration  is  a  cor- 
poration created  or  organized  in  the  United  States,  which  includes  the 
States,  Territories  of  Alaska  and  Hawaii,  and  the  District  of  Co- 
lumbia. 

Art.  10,  Foreign  corporations. — A  foreign  corporation  is  a  corpora- 
tion created  or  organized  outside  the  United  States  as  defined  in 
article  9. 

TAX   ON   DOMESTIC   CORPORATIONS. 

Sec.  1000  (a)  (1).  Evei-y  domestic  corporation  shall  pay  anniially  a 
special  excise  tax  v.-ith  respect  to  carrying  on  or  doing  business,  equiva- 
lent to  ?1  for  each  .$1,000  of  so  much  of  the  fair  average  value  of  its  capi- 
tal stock  for  the  preceding  year  ending  June  30  as  is  in  excess  of  $5,000. 
In  estimating  the  value  of  capital  stock  the  surplus  and  undivided 
profits  shall  be  include*! ; 

Art.  11.  Basis  of  the  tax:  "Carrying"  on  or  doing  business." — ^The 
basis  of  the  tax  in  the  case  of  a  domestic  corporation  is  "  carrying  on 
or  doing  business  "  in  the  capacity  of  a  corporation  or  association. 
The  words  "  carrying  on  or  doing  business  "  must  be  given  their  ordi- 
nary and  natural  signification.  "Business"  is  a  very  comprehensive 
term  and  embraces  wliatever  occupies  the  time,  attention,  or  labor  of 
men  for  the  purpose  of  livelihood  or  profit.  In  other  words,  business 
necessarily  involves  the  idea  of  gain.  The  true  basis  of  distinction  is, 
in  the  first  instance,  between — 

(a)   A  corporation  organized  for  the  purpose  of  doing  business 

as»  above  defined,  and 
(h)   A  cori)oration  organized  for  the  sole  purpose  of  owning  and 
holding  property  and  distributing  its  avails; 


4  CAPITAL.  STOCK    TAX   UNDER  REVENUE   ACT   OF   1921. 

and,  in  the  second  instance,  between — 

(c)   A  corporation  of  class  («)  which  is  continuing  the  body  and 
substance  of  the  business  for  which  it  was  organized  or  is 
still  active  and  maintaining  its  organization  for  the  pur- 
pose of  continued  efforts  in  the  pursuit  of  profit  or  gain, 
and 
{(I)   A  corporation  which,  although  included  in  class   (a),  has 
substantially  retired  from  the  business  for  which  it  was 
organized  and  has  reduced  its  activities  to  the  mere  own- 
ership and  holding  of  property,  distributing  its  avails, 
and  doing  only  the  acts  necessary  to  the  maintenance  of 
its  corporate  existence  and  the  private  management  of  its 
purely  internal  affairs. 
The  distinction  in  each  case  must  depend  upon  the  peculiar  facts  in 
the  case.     Corporations  of  class  (a)  will  be  presumed  to  be  subject 
to  the  tax  unless  they  submit  proof,  satisfactory  to  the  commissioner, 
that  they  are  not  actually  carrying  on  or  doing  business.     If  a  cor- 
poration claim  exemption  on  the  ground  that  it  belongs  to  class  (&), 
it  will  be  required  to  file  an  excerpt  from  its  charter  setting  forth 
its  corporate  powers  together  with  a  full  and  comprehensive  state- 
ment showing  the  nature  of  the  activities  in  which  it  is  and  has  been 
actually  engaged.     If  it  claim  exemption  on  the  ground  that  it  be- 
longs to  class  (d),  it  will  be  required  to  furnish  a  copy  of  any  amend- 
ment of  its  charter,  or  other  evidence,  satisfactory  to  the  commis- 
sioner, showing  that  it  has  reduced  its  activities  to  the  mere  owner- 
ship of  property,  receipt  of  its  avails,  and  the  doing  of  only  what  is 
necessary  to  the  maintenance  of  its  corporate  existence. 

A  corporation  that  has  "  substantially  retired  from  business "  is 
one  that  has  changed  its  status,  as,  for  instance,  by  divesting  itself 
of  all  control  over  and  management  of  the  property  formerly  em- 
ployed by  it  in  the  doing  of  business,  and  has  reduced  its  activities 
accordingly. 

The  leasing  of  all  the  property  of  a  corporation  whereby  it  divests 
itself  of  control  and  management  thereof,  or  the  sale  of  all  the 
property  of  a  corporation  and  the  reduction  of  its  activities  to  the 
collection  of  the  proceeds  of  the  sale  on  an  installment  plan,  are 
instances  of  a  corporation  substantially  retiring  from  business. 

Art.  12.  "  Carrying  on  or  doing  business  "  illustrated, — Corpora- 
tions organized  for  the  purpose  of  and  actually"  engaged  in  such 
activities  as  buying,  selling,  or  dealing  in  mineral  or  timber  land  or 
other  real  estate ;  leasing  property,  collecting  rents,  managing  office 
buildings,  making  investments  of  profits;  leasing  lands  and  collect- 
ing royalties,  managing  wharves,  dividing  profits ;  and  in  some  cases 


CAPITAL,  STOCK   TAX  UNDER  EEVENUE   ACT  OF   1921.  5 

investing  the  surplus,  are  engaged  in  "  carrying  on  or  doing  business  "^ 
AAathin  the  meaning  of  the  statute. 

A  corporation  may  complete  its  organization  and  sell  its  capital 
stock  for  cash  without  incurring  liability,  but  other  activities,  such 
as  entering  into  contracts  for  the  purchase  of  property  or  construc- 
tion of  a  plant  are  corporate  business  acts,  and  constitute  doing 
business.  In  other  words,  it  is  not  necessary  that  a  companj^  be 
actually  engaged  in  the  manufacture  of  its  intended  product  or  that 
it  be  actually  creating  profit  or  gain  to  incur  liabilit3\  The  making 
of  contracts,  buying  of  materials  or  machinery,  constructing  build- 
ings, employing  and  discharging  of  individuals  are  necessary  busi- 
ness acts  leading  to  the  more  profitable  end  of  manufacturing  cer- 
tain products^ 

The  letting  of  a  contract  and  construction  of  a  hotel  preparatory 
to  engaging  in  the  hotel  business  is  sufficient  to  incur  liability. 

A  corporation  organized  for  the  purpose  of,  and  actually  engaged 
in,  buying  mineral  or  timber  land  or  other  real  estate  and  holding  it 
with  a  view  to  future  sale  at  an  advance  is  carrjdng  on  or  doing 
business. 

A  corporation  organized  for  the  purpose  of  owning  and  leasing 
real  estate  which  has  leased  all  of  the  property  under  its  control  is 
still  encacfed  in  doinix  business  unless,  under  the  terms  of  its  lease, 
its  activities  have  been  reduced  to  the  mere  receipt  and  distribution 
of  the  avails  of  the  leases  at  the  actual  cost  of  so  doing.  If  it  is  still 
maintaining  its  organization  for  the  purpose  of  continued  effort  in 
the  pursuit  of  profit  and  gain  it  is  doing  business. 

A  corporation  owning  or  managing  real  estate  which  leases  all  of 
its  property,  but  under  the  terms  of  tTie  lease  is  required  to  maintain 
or  keep  the  property  in  repair,  is  doing  business. 

No  particular  amount  of  business  is  required  in  order  to  bring  a 
company  within  the  terms  of  the  act. 

A  corporation  engaged  in  mining  or  in  developing  and  speculating 
in  mineral  lands  is  doing  business. 

A  corporation  engaged  in  buying  and  selling  securities  or  other 
property  is  doing  business,  even  though  for  a  period  it  makes  no 
purchases  or  sales  because  of  unfavorable  market  conditions. 

A  corporation  formed  to  take  over  miscellaneous  stocks,  bonds,  or 
other  property  (as  of  an  estate),  to  negotiate  sales  of  various  items 
from  time  to  time  as  opportunity  and  judgment  dictate,  and  to  dis- 
tribute the  profits  from  time  to  time  as  liquidation  is  effected,  is, 
while  so  engaged,  carrying  on  or  doing  business. 

A  parent  corporation  which  finances  or  manages  the  operations  of 
its  subsidiaries  is  doing  business. 

A  so-called  liolding  company  which,  under  its  charter,  is  author- 
ized to  and  does,  in  addition  to  receiving  and  distributing  the  avails 
102340°— 22 2 


6  CAPIT^VL   STOCK    TAX   UNDER  TvEVENUE    ACT   OF    1921. 

of  the  property  or  securities,  held  by  it,  j&nance  the  operations  of  its 
subsidiaries,  is  engaii'od  in  doino;  business. 

A  corporation  organized  for  the  purpose  of  talving  over  and  hold- 
ing securities,  timber  land,  coal  lands,  or  other  real  estate,  is  held  to 
be  doing  business,  if  it  makes  investments  or  reinvestments  of  its 
surplus  income  or  funds  in  excess  of  an  amount  necessary  to  maintain 
its  original  investments. 

Art.  13.  Not  "  doing  business." — Holding  companies  as  distin- 
guished from  parent  corporations,  and  corporations  all  of  whose 
property  and  business  is  operated  by,  or  is  in  the  hands  of,  a  receiver 
or  the  Alien  Property  Custo<lian,  are  not  doing  business. 

A  holding  company  is  defined  as  one  whose  corporate  powers  are 
limited  to  the  mere  owning  and  holding  of  property  and  distribution 
of  its  avails,  or  one  which,  although  incorporated  for  the  purpose  of 
doing  business  as  defined  in  article  11,  has  substantially  retired  from 
the  business  for  which  it  was  organized  and  has  reduced  its  activities 
to  the  mere  ownership  and  holding  of  property,  distributing  its 
avails,  and  doing  onl}^  such  acts  as  are  necessary  to  the  maintenance 
of  its  corpoi'ate  existence  and  the  private  management  of  its  purely 
internal  affairs. 

A  holding  companj'',  as  above  defined,  will  not  be  considered  to  be 
doing  business  by  reason  of  the  reinvestment  of  its  surplus  income  or 
funds  to  the  extent  only  of  maintaining  its  original  investments. 

Art.  14.  Computation  of  tax.— -The  tax  is  imposed  at  the  rate  of 
$1  for  each  full  $1,000  of  the  fair  average  value  of  the  capital  stock 
of  the  corporation  in  excess  of  the  prescribed  deduction  of  $5,000. 

The  tax  being  payable  in  advance  is  prospective  and  is  measured  by 
the  fair  average  value  for  the  year  preceding  the  taxable  year,  not 
the  fair  value  of  the  average  capital  stock.  If  a  corporation  begins 
business  within  the  preceding  year  or  increases  or  decreases  its  capital 
within  the  preceding  year,  thereby  materially  changing  the  fair  value 
of  the  capital  stock,  the  tax  is  measured  by  the  fair  value  of  the 
capital  stock  outstanding  at  the  date  of  incidence  of  the  tax  (June 
30).  Therefore,  while  Form  707  permits,  as  a  matter  of  convenience 
to  the  taxpaj'er,  tlie  using  of  a  balance  sheet  as  of  a  date  prior  to 
June  30,  but  not  prior  to  the  preceding  December  31,  if  there  is  a 
material  change  in  the  condition  and  affairs  of  the  company  affecting 
the  fair  value  of  the  capital  stock  subsequent  to  the  closing  of  the 
books  and  i3rior  to  the  date  of  the  incidence  of  the  tax  (June  30), 
the  financial  condition  should  be  reported  under  Exhibit  A  as  of 
June  30,  giving  effect  to  such  material  changes.  Under  Exhibit  B, 
the  market  value  will  be  determined  by  multiplying  the  average 
market  price  per  share  for  the  period  during  which  the  capital  stock 
as  of  June  30  has  been  outstanding  by  the  number  of  shares  out- 
standing as  of  that  date. 


CAPITAL,  STOCK    TAX   UNDER  EETEXUE   ACT  OF   1921.  7 

Ko  deduction  is  allowed  corporations  organized  in  the  United 
States  for  capital  invested  outside  of  the  United  States.  If  the  cor- 
poration is  doing  business  it  is  taxed  on  its  entii-e  capital  stock  even 
though  most  of  it  may  not  be  employed  in  the  business. 

Aet.  15.  Fair  average  value  of  capital  stock. — The  fair  average  value 
of  the  capital  stock  for  the  purpose  of  determining  the  amount  of 
the  capital  stock  tax  must  not  be  confused  with  the  market  value 
of  the  shares  of  stock  where  it  may  be  necessary  to  determine  such 
value  under  other  provisions  of  the  revenue  laws.  The  fair  average 
value  of  the  capital  stock,  the  statutory  basis  of  the  tax,  is  not  nec- 
essarily the  book  value  or  the  value  based  on  prices  realized  in 
current  sales  of  shares  of  stock  or  the  value  determined  by  capitali- 
zation of  earnings. 

Form  707  provides  Exhibit  A  for  the  book  or  fair  value  of  the 
assets,  Exhibit  B  for  the  market  value  of  the  shares,  and  Exhibit  C 
for  the  value  of  the  capital  stock  based  on  the  capitalized  earnings. 
All  information  called  for  must  be  given  in  every  case  where  it  is 
procurable.  The  fair  average  value  of  the  capital  stock  of  a  corpo- 
ration and  the  tax  payable  thereon  shall  be  determined  from  a  con- 
sideration of  the  data  contained  in  the  return  as  well  as  all  elements 
and  factors  affecting  values,  which  should  be  harmonized  so  far  as 
possible  in  the  ultimate  fair  value  found.  Fair  value  is  required 
irrespex;tive  of  the  exhibit  used  or  the  method  employed  in  its  de- 
termination. 

Exhibit  A. — The  character  of  the  assets  is  probably  the  most  im- 
portant factor  in  determining  the  reliability  of  the  value  reflected 
by  this  exhibit  as  being  indicative  of  the  fair  value  of  the  capital 
stock.  If  the  market  value  of  the  assets  be  established  the  fair  value 
of  the  capital  stcK'k  is  held  to  be  not  materially  less  than  the  fair 
market  value  of  the  net  assets.  Attempts  to  average  the  assets  as  a 
means  of  estimating  the  fair  average  value  of  the  capital  stock  are. 
not  permitted. 

Exhibit  13. — The  market  is  regarded  as  a  factor,  but  only  of  im- 
portance when  the  underlying  factors  upon  which  the  market  has 
been  established  are  sound  in  all  essential  particulars. 

Exhibit  C. — The  vreight  attaching  to  this  exhibit  is  largely  de- 
pendent up(m  the  nature  of  the  business  and  character  of  the  assets. 

In  capitalizing  the  net  earnings  of  the  corporation,  which  should 
reflect  the  true  earning  capacity,  the  officers  should  use  a  rate  fairly 
representing  the  conditions  obtaining  in  the  trade  and  in  the  locality, 
with  due  regard  to  other  important  factors,  including  the  wortli  of 
money.  But  such  fair  value  must  not  be  greatly  at  variance  with 
the  reconstructed  book  value  shown  by  Exhibit  A,  unless  the  corpo- 
ration is  materially  affected  by  extraordinary  conditions  which  sup- 
port a  lower  valuation.     In  any  such  case  a  full  explanation  must 


8  CAPITAL  STOCK    TAX  UNDER   REVENUE   ACT   OF    1921. 

accomi^any  the  return.  The  commissioner  Avill  estimate  the  fair 
vahie  of  the  capital  stock  in  cases  regarded  as  involving  any  under- 
statement or  undervaluation. 

The  fair  value  of  the  capital  stock,  as  provided  under  section 
1000(a)  (1)  of  the  Revenue  Act  of  1921,  and  invested  capital  under 
the  excess-profits  tax  provisions  of  the  Eevenue  Act  of  1921  are  not 
necessarily  the  same. 

For  the  purpose  of  capital-stock  tax  the  fair  value  of  the  cap- 
ital stock  is  estimated,  and  is  predicated  on  present  values,  including 
actual  appreciation  of  property,  whether  realized  or  unrealized,  and 
such  intangible  assets  as  good  will,  trade-marks,  and  patejits  to  the 
extent  reflected  by  the  earning  power,  whereas,  for  the  purpose  of 
excess-profits  tax,  the  invested  capital  is  based  upon  the  actual  in- 
vestment of  the  stockholders  in  the  corporation,  irrespective  of  the 
present  value  of  its  assets.  In  the  case  of  the  capital-stock  tax  the 
fair  value  looks  to  the  present  net  value  of  the  assets,  irrespective  of 
the  amount  of  the  investment  of  the  stockholders,  (See  art.  863, 
Reg.  62.) 

Art.  16.  Surplus  and  undivided  profits. — The  surplus  and  undivided 
profits  of  a  corporation  must  be  included  in  estimating  the  fair 
average  value  of  its  capital  stock.  If  the  fair  average  value  be  de- 
termined from  the  book  value,  the  surplus  and  undivided  profits 
are  included  in  the  assets ;  if  from  sales,  they  are  necessarily  a  factor 
in  determining  the  market  price;  and,  if  from  net  income,  they  are 
reflected  to  a  greater  or  less  extent  in  the  earnings. 

RETURNS. 

Sections  1300  and  1307  of  the  Act  read  as  follows: 

Sec.  1300.  That  all  administrative,  special,  or  stamp  provisions  of  law, 
including  the  law  relating  to  the  assessment  of  taxes,  so  far  as  applicable, 
are  hereby  extended  to  and  made  a  part  of  this  Act,  and  every  person 
liable  to  any  tax  imposed  by  this  Act,  or  for  the  collection  thereof,  shall 
keep  such  records  and  render,  under  oath,  such  statements  and  returns,  and 
shall  comply  with  such  regulations  as  the  Commissioner,  with  the  approval 
of  the  Secretary,  may  from  time  to  time  prescribe. 

Sec.  1307.  That  whenever  in  the  judgment  of  the  Commissioner  necessary 
he  may  require  any  person,  by  notice  served  upon  him,  to  make  a  return  or 
such  statements  as  he  deems  sufficient  to  show  whether  or  not  such  person 
is  liable  to  tax. 
Art.  17.  PvCturn  by  domestic  corporation. — Every  domestic  corpora- 
tion must  make  a  return  on  Form  707  even  though  the  law  may  in- 
dica'te  that  it  is  exempt  from  the  tax.     The  question  of  exemption 
is  one  for  determination  by  the  commissioner.     Also  see  articles  31 
and  20. 

Art.  18.  Return  by  affiliated  corporation. — Although  section  240  of 
the  Revenue  Act  of  1921  requires  a  consolidated  return  for  affiliated 


CAPITAL.  STOCK    TAX  UNDER  REVENUE   ACT   OF   1921.  9 

corporations  for  the  purpose  of  income  tax,  jot  the  purpose  of  capital 
stock  tax  each  corporation  must  render  a  separate  return  in  comr 
plete  form.  So-called  subsidiary  corporations,  all  or  a  part  of  the 
stock  of  which  is  owned  by  another  corporation,  must  render  separate 
returns,  the  same  as  every  other  corporation.  No  deductions  from 
the  assets  are  permitted  on  account  of  intercompany  balances,  and 
the  shareholdings  must  be  reported  in  the  "  Fair  value  "  column  at 
their  actual  worth  at  the  time  of  making  the  return.  No  deduction  is 
allowed  in  the  return  of  one  corporation  for  the  tax  paid  by  another. 

If  the  fair  value  is  determined  by  any  method  other  than  herein 
provided,  the  following  requirements  must  be  complied  with:  (a) 
The  parent  company  must  submit  with  its  return  a  list  of  all  sub- 
sidiaries and  the  districts  in  which  the  returns  were  filed;  (b)  the 
return  of  the  subsidiary  company  must  show  the  name  of  the  parent 
company  and  the  district  in  which  the  return  was  filed;  (c)  the 
method  of  determining  the  fair  value,  if  other  than  by  Exhibits 
A,  B,  and  C,  must  be  fully  explained;  (d)  a  copy  of  any  agi'eement 
existing  between  parent  company  and  subsidiary  must  be  furnished, 
or  a  statement  made  that  none  exists;  and  (e)  a  combined  balance 
sheet  and  a  combined  net  income  statement  must  be  submitted  for 
consideration  in  connection  with  any  estimate  of  fair  value  made 
on  behalf  of  the  reporting  corporation. 

Art.  19.  Verification  of  return. — The  return  and  any  separate  state- 
ment submitted  therewith  must  be  verifi.ed  in  the  form  printed  on 
page  3  of  the  return.  In  the  absence  of  the  president  or  treasurer, 
or  both,  other  responsible  officers  may  execute  the  jurat  to  avoid 
delinquenc3\  However,  if  the  amount  of  the  tax  covered  thereby 
is  not  in  excess  of  $10,  the  return  may  be  signed  or  acknowledged 
before  two  witnesses  instead  of  under  oath.     (Sec.  1303  of  the  Act.) 

Art.  20.  Time  for  making  return. — It  shall  be  the  duty  of  every 
corporation  on  or  before  the  31st  day  of  July  in  each  year  to  make 
a  return  to  the  collector  of  the  district  in  which  its  principal  place 
of  business  is  located.  If  any  corporation  fails  to  make  and  file  a 
return  within  the  time  prescribed  by  law  or  by  regulation  made 
under  authority  of  law,  or  makes,  willfully  or  otherwise,  a  false  or 
fraudulent  return,  the  collector  or  deputy  collector  shall  make  the 
return  from  his  own  knowledge  and  from  such  information  as  he 
can  obtain  througli  testimony  or  otherwise.  In  any  such  case  the 
commissioner  may,  from  his  own  knowledge  and  from  such  infor- 
mation as  he  can  obtain  through  testimony,  or  otherwise,  make  a 
return  or  amend  any  return  made  by  a  collector  or  deputy  collector. 
Any  return  so  made  and  subscribed  by  the  commissioner,  or  by  a 
collector  or  deputy  collector  and  approved  by  the  commissioner,  shall 
be  prima  facie  good  and  sufficient  for  all  legal  purposes.  If  on  ac- 
count of  sickness  or  absence  of  the.  officer  of  the  corporation  charged 


10  CAPITAL  STOCK    TAX  UKDER  REVENUE   ACT   OF   1921. 

witli  makino;  the  return,  it  is  impossible  to  prepare  and  file  a  return  on 
or  before  the  31st  day  of  Jidy  (the  due  date),  the  collector,  upon 
application  in  writing,  may  allow  an  extension  of  time  not  exceeding 
30  days  from  July  31,  in  which  to  file  the  return.  //'  extension  is 
(/ranted,  the  letter  of  the  collector  should  he  attached  to  the  return. 
(See  Sec.  3176,  E.  S.) 

On  no  account  is  the  Commissioner  of  Internal  Revenue  or  the 
collector  authorized  to  grant  an  extension  of  time  in  which  to  file 
capital  stock  tax  returns  in  excess  of  30  days  from  July  31,  the  due 
date.  If  for  reasons,  other  than  absence  or  sickness,  beyond  the 
control  of  the  officers  making  the  return,  it  becomes  impossible  to  fde 
a  completed  return  within  the  time  prescribed  by  law,  a  tentative 
return  may  be  filed. 

Art.  21.  Tentative  return. — The  filing  of  a  tentative  return  within 
the  prescribed  period  will  avoid  the  penalty  for  delinquent  filing, 
but  will  not  authorize  the  withholding  of  the  tax.  The  regulations 
do  not  permit  the  filing  of  a  tentative  return  to  stay  indefinitely  the 
filing  of  a  completed  return  and  the  collection  of  the  tax  due.  There- 
fore if  a  tentative  return  is  filed  it  should  be  clearly  marked  ''  Tenta- 
tive Return  "  and  should  be  prepared  in  as  complete  a  manner  as  pos- 
sible, includin^j;,  among  other  information,  a  basis  for  the  computa- 
tion of  the  tax — that  is,  an  estimate  by  the  officers  of  the  corporation 
of  the  approximate  fair  value  of  the  capital  stock  in  order  that  an. 
initial  assessment  may  be  made.  When  the  completed  return  is  filed, 
it  should  be  clearly  marked  "  Completed  return,"  showing  that  a  ten- 
tative return  was  filed.  Such  action  wdll  prevent  duplicate  assess- 
ments and  ordinary  penalties.  In  every  case  a  statement  should  be 
attached  to  the  tentative  return,  indicating  the  approximate  date  the 
completed  return  may  be  expected.  Upon  receipt  of  the  completed 
return  anj'  adjustment  necessary  in  the  assessment  of  the  correct  tax 
due  will  be  made. 

TAX  ON  FOREIGN  CORPORATIONS. 

Sec.  1000.  (a)  (2)  Every  foreign  corporation  shall  pay  annually  a  special 
excise  tax  with  respect  to  carrying  on  or  doing  business  in  the  United  States, 
equivalent  to  $1  for  each  $1,000  of  the  average  amount  of  capital  employed 
in  the  transaction  of  its  business  in  the  United  States  during  the  preceding 
year  ending  June  30. 

Art.  22.  Basis  of  the  tax. — The  basis  of  the  tax  in  the  case  of  a  for- 
eign corporation  is  "  carrying  on  or  doing  business  in  the  United 
States."  Foreign  insurance  companies  are  not  liable  to  capital  stock 
tax.     (See  art.  29.) 

A  foreign  corporation  is  carrying  on  or  doing  business  in  the 

United  States  if  it  maintains  an  agent  or  an  office  or  warehouse  in 

the  United  States  or  in  any  other  way  enters  the  United  States  for 
the  purposes  of  its  business.     Tlie  purchase  of  supplies  in  the  United 


CAPITAL  STOCK    TAX  UNDEK   EE\T:]SrUE   ACT   OF   1921.  H 

States  in  the  furtherance  of  continued  efforts  in  tlie  pursuit  of  profit 
or  gain  is  carrying  on  or  doing  business  in  the  United  States. 

Abt.  23.  Capital  employed  in  tlie  United  States. — The  "  capital  em- 
ployed in  the  transaction  of  its  business  in  the  United  States  "  means 
the  portion  of  the  total  capital,  surplus,  and  undivided  profits,  of 
the  foreign  corporation,  utilized  for  the  purpose  of  doing  business 
in  the  United  States.  A  foreign  corporation  may  have  income  from 
sources  within  the  United  States  for  the  purpose  of  the  income  tax, 
and  yet  not  have  capital  employed  in  the  transaction  of  business 
here  for  the  purpose  of  the  capital-stock  tax.  Compare  articles 
92-94  and  316-329  of  Regulations  62.  A  foreign  corporation  not 
actually  doing  business  in  the  United  States  is  not  subject  to  tax, 
and,  accordingly,  the  investment  of  a  part  of  its  funds  in  United 
States  stocks  and  securities  will  not  constitute  capital  employed  in 
its  business  in  the  United  States.  For  the  definition  of  "  doing 
business"  see  article  11.  If  a  corporation  does  business  in  this 
country,  then,  although  the  mere  investment  of  funds  in  United 
States  securities  is  not  such  a  taxable  employment  of  capital,  such 
investment  will  constitute  capital  employed  in  the  transaction  of  busi- 
ness in  the  United  States  if  made  in  a  subsidiary  corporation  wliich 
the  foreign  corporation  uses  as  an  instrumentality  for  the  conduct 
of  its  own  business  in  the  United  States.  Thus  the  investment  of  the 
funds  of  a  foreign  corporation  in  the  purchase  of  facilities,  although 
apparently  independent,  for  the  purpose  of  its  business  here,  or  the 
purchase  of  stock  and  securities  of  a  subsidiary  corporation  for  the 
same  purpose,  will  constitute  the  employment  of  capital  in  the  trans- 
action of  business  in  the  United  States.  A  foreign  corporation  may 
not  escape  taxation  by  organizing  or  purchasing  the  stock  of  another 
corporation  to  own  the  facilities  which  the  foreign  corporation  needs 
in  its  business.     See  article  352,  Regulations  62, 

Art.  24.  Capital  employed  in  the  United  States  illustrated. — A  for- 
eign corporation  may  employ  capital  in  the  transaction  of  its  busi- 
ness in  the  United  States  in  various  ways.  For  example,  the  invest- 
ment of  funds  m  property  in  the  United  States  used  in  its  business, 
in  stocks  and  securities  of  subsidiary  corjwrations  as  explained  in 
article  23,  in  bills  and  accounts  receivable  representing  business 
done  in  the  United  States,  in  merchandise  kept  here  for  sale,  in  ma- 
terials manufactured  here,  and  in  deposits  in  United  States  banks 
maintained  for  use  in  business  here.  Generally  speaking,  approxi- 
mately such  proiwrtion  of  tlie  entire  capital  of  a  foreign  corporation 
will  presumably  be  employed  in  the  transaction  of  its  business  in  the 
United  States  as  the  gross  amount  of  its  business  in  the  United 
State-s  bears  to  its  total  gross  business,  but  this  will  not  always  be 
conclusive,  since  a  corporation  may  conceivably  transact  a  greater  or 


12  CAPITAL  STOCK    TAX  UNDER  REVENUE   ACT   OF    1921. 

less  volume  of  business  in  one  country  tlian  in  another  on  the  same 
amount  of  capital. 

Art.  25,  Return  by  foreign  corporation. — Every  foreij^n  corporation 
carrying-  on  or  doing  business  in  the  Ignited  States  shall  make  return 
on  Form  708,  irrespective  of  the  amount  of  capital  employed  in  this 
country  in  the  transaction  of  its  business.  The  capital  actually  em- 
ployed in  the  transaction  of  the  business  of  a  foreign  corporation  in 
the  United  States  and  the  tax  payable  thereon  shall  be  calculated  in 
accordance  with  the  instructions  on  the  form. 

Art.  26.  Computation  of  tax. — The  tax  is  at  the  rate  of  $1  for  each 
full  $1,000  of  the  capital  of  a  foreign  corporation  actually  employed 
in  the  transaction  of  its  business  in  the  United  States,  and  is  in  all 
cases  to  be  computed  on  the  basis  of  the  average  amount  of  capital  so 
emploj'^ed  during  the  preceding  year  ending  June  30.  The  measure 
of  the  tax  is  accordingly  different  from  that  of  domestic  corporations 
which  pay  a  tax  measured  by  the  fair  average  value  of  their  capital 
stock,  No  deduction  from  the  total  fair  average  amount  of  capital 
so  employed  is  allowed  in  computing  the  tax. 

Art.  27.  Measure  of  tax. — The  measure  of  the  tax  is  the  average 
amount  of  capital  employed  in  the  transaction  of  business  in  the 
United  States  during  the  preceding  fiscal  year.  It  will  usually  be 
sufficient  to  determine  the  amount  of  capital  so  employed  at  the 
beginning  of  each  year  and  the  amount  so  employed  at  the  end  of 
such  year,  and  to  divide  the  sum  of  such  amounts  by  two.  Where, 
however,  there  have  been  material  changes  in  the  amount  of  capital, 
the  average  amount  should  be  determined  with  due  regard  to  the 
times  at  which  such  changes  occurred,  A  foreign  corporation  may, 
if  it  so  desire,  compute  the  average  amount  of  capital  employed  on  a 
monthl}'  basis. 

EXEMPTION  FROM  TAX. 

Sec.  1000.  (b)  The  taxes  imposed  by  this  section  sliall  not  apply  in 
any  year  to  any  corporation  which  was  not  engaged  in  business  (or,  in 
tlie  case  of  a  foreign  corporation,  not  engaged  in  business  in  tlie  United 
States)  during  the  preceding  year  ending  June  30,  nor  to  any  corpora- 
tion enumerated  in  section  231,  nor  to  any  insurance  company  subject 
to  the  tax  imposed  by  section  243  or  246. 

Art,  28.  Corporation  not  in  business  during*  preceding  year. — The  tax 
being  paj^able  in  advance  does  not  apply  to  any  corporation  which 
was  not  engaged  in  business  during  any  part  of  the  fiscal  year  pre- 
ceding the  year  for  which  the  tax  is  due,  but  if  it  was  in  business 
even  one  day  of  the  preceding  year  and  one  day  of  the  taxable  year 
it  is  subject  to  the  tax.  There  is  no  relation  betAveen  the  amount 
of  the  tax  payable  and  the  length  of  time  the  corporation  was  in 
business.  A  corporation  engaged  in  business  during  a  part  of  the 
prceding  year,  but  not  engaged  in  business  at  the  beginning  of  the 
taxable  year,  is  not  required  to  make  any  return  if  it  is  dissolved 


CAPITAL  STOCK   TAX  UNDER  REVEISTUE   ACT  OF   1921.  13 

or  in  process  of  dissolution,  but  if  it  is  only  temporarily  inactive  and 
subsequently  during  the  year  reengages  in  business  it  should  file  a 
return  in  the  month  in  which  it  recommences  business  and  pay  the 
tax  due  from  the  first  of  such  month  to  the  end  of  the  taxable  year. 
A  corporation  organized  and  beginning  corporate  activities  on  or 
after  July  1  is  not  subject  to  tax  for  the  remainder  of  the  taxable 
period  in  which  the  company  was  organized,  unless,  as  of  July  1, 
it  takes  over  the  business  of  an  organization  wdiich  was  subject  to 
capital  stock  tax,  in  which  event  the  new  corporation  is  required 
to  file  a  return  and  pay  the  tax.  Also  see  article  32  relative  to 
election  to  be  taxed  as  a  corporation.  In  the  case  of  foreign  cor- 
porations "  engaged  in  business  "  means  the  transaction  of  any  busi- 
ness within  the  United  States. 

Art.  29.  Organizations  and  insurance  companies  exempt. — The  tax 
does  not  apply  to  insurance  companies  (stock,  mutual,  domestic,  or 
foreign)  nor  to  corporations  the  fair  value  of  whose  capital  stock 
for  the  preceding  year  does  not  exceed  $5,000  nor  to  any  of  the  fol- 
lowing classes  of  corporations  specified  in  section  231  of  the  act,  viz : 

(1)  Labor,  agricultural,  or  horticultural  organizations: 

Agricultural  or  horticultural  organizations  exempt  from  tax  do  not  in- 
clude corporations  engaged  in  growing  agricultural  or  horticultural  prod- 
ucts or  raising  live  stock  or  similar  protlucts  for  profit,  l)ut  include  only 
those  organizations  which,  having  no  net  income  inuring  to  the  benefit 
of  their  members,  are  educational  or  instructive  in  chai'acter  and  have  for 
their  purpose  the  betterment  of  the  conditions  of  those  engaged  in  these 
pursuits,  the  improvement  of  the  grade  of  their  products,  and  the  en- 
couragement and  promotion  of  these  industries  to  a  higher  degi-ee  of 
efficiency.  Included  in  this  class  as  exempt  are  organizations  such  as  county 
fairs  and  like  associations  of  a  quasi-public  character,  which  through  a 
system  of  awards,  prizes,  or  premiums  are  designed  to  encourage  the  pro- 
duction of  better  live  stock,  better  agricultui-al  and  horticultural  products, 
and  whose  income,  derived  from  gate  receipts,  entry  fees,  donations,  etc., 
is  used  exclusively  to  meet  the  necessary  expenses  of  upkeep  and  opera- 
tion. Societies  or  associations  which  have  for  their  purpose  the  holding 
of  annual  or  periodical  race  meets,  from  which  profits  inure  or  may  inure 
to  the  benefit  of  the  members  or  stockholders,  do  not  come  within  the 
terms  of  this  exemption.  A  corporation  engaged  in  the  business  of  raising 
stock  or  poultry,  or  growing  grain,  fruits,  or  other  products  of  this  char- 
acter, as  a  means  of  livelihood  and  for  the  purpose  of  gain,  is  an  agri- 
cultural or  horticultural  society  only  in  the  sen.se  that  its  name  indicate* 
the  kind  of  business  in  which  it  is  engaged,  and  it  is  not  exempt  from  tax. 
(Art.  512,  Reg.  62.) 

(2)  Mutual  savings  banks  not  having  a  capital  stock  represented 

by  shares : 

A  JIassachusetts  savings  bank,  otherwise  exempt,  which  establishes  an 
insurance  department  under  the  statutes  of  that  State,  does  not  thereby 
become  subject  to  tax  upon  the  income  received  by  such  department. 
(Art.  513,  Reg.  62.) 

102340°— 22 3 


14  CAPITAL  STOCK    TAX   UNDER   REVENUE    ACT   OF    1921. 

(3)  Fraternal  beneficiary  societies,  orders,  or  associations,  (a) 
operatin<T  under  the  lodoe  system  or  for  the  exclusive  benefit  of  the 
members  of  a  fraternity  itself  operatinf^  under  tb.e  lodoe  system ;  and 
(b)  jjrovidino:  for  the  payment  of  life,  sick,  accident,  or  other  benefits 
to  the  members  of  such  society,  order,  or  association  or  their  de- 
pendents : 

A  fraternal  beneficiaiy  society  is  exempt  from  tax  only  if  operated  under 
the  ■"  lodse  system,"  or  for  the  exclusive  benefit  of  the  nuMiibers  of  a  society 
so  operating'.  "  Operating  under  the  lodge  system  "  means  carrying  on  its 
activities  under  a  form  of  organization  that  comprises  local  branches, 
chartered  l>y  a  parent  organization  and  largely  self-governing,  called  lodges, 
chai)ters,  or  the  lilvO.  Tn  order  to  l^e  exempt  it  is  also  necessary  that  the 
society  have  an  established  system  for  the  payment  to  its  members  or  their 
dependents  of  life,  sick,  accident,  or  other  benefits.     (Art.  514,  Reg,  62.) 

(4)  Domestic  building  and  loan  associations  substantially  all  the 
business  of  which  is  confined  to  makings  loans  to  members;  and  co- 
operative banks  without  capital  stock  organized  and  operated  for 
mutual  purposes  and  without  profit : 

In  general,  a  building  and  loan  association  entitled  to  exemption  is  one 
organized  pursuant  to  the  laws  of  any  State,  Territory,  or  the  District  of 
Columbia,  which  accumulates  funds  to  be  loaned  primarily  to  its  share- 
holders for  the  purpose  of  building  or  acquiring  homes.  In  order  to  be 
exempt  the  association  (1)  mxist  be  mutual,  that  is,  all  of  its  stockholders, 
or  members  must  share  in  the  profits  on  substantially  the  same  footing; 
and  (2)  must  be  operated  so  that  substantially  all  of  its  business  is  con- 
fined to  the  making  of  loans  to  bona  fide  shareholders.  A  b\iilding  and  loan 
association  otherwise  exempt  does  not  lose  its  exempt  status  because — 

(1)  It  has  paid-up  shares  which  are  (a)  preferred  as  to  earnings,  and 
<b)  have  a  definite  rate  of  interest  which  may  be  higher  than  tbe  rjite  of 
dividends  paid  on  other  stock. 

(2)  It  borrows  money  (accepting  deposits  is  held  to  be  a  form  of  bor- 
rowing) which  it  uses  for  loans  to  shareholder.s,  the  diies,  fines,  and  pen- 
alties paid  by  shareholders  being  inadequate  for  this  purpose. 

(3)  It  makes  loans  to  nonmembers  from  accumulated  funds  whicli 
are  not  needed  for  loans  to  shareholders.  In  any  such  case,  however,  the 
burden  ^^^ll  be  upon  the  association  to  show  that  substantially  all  of  its 
loans  are  made  to  members. 

(4)  The  amount  of  its  prepaid  or  full-paid  stock  is  disproportionate  to 
running  or  installment  stock,  provided  the  issuance  of  such  prepaid  or 
full-paid  stock  is  ancillary  to  the  furtherance  of  the  main  business  of  the 
association  ;  that  is,  that  it  is  intended  to  provide  a  fund  from  which  loans 
may  be  made  i)!-imarily  to  persons  subscribing  to  running  or  installment 
stock  to  enable  them  to  acquire  or  biiild  homes. 

Cooperative  lianks  without  capital  stock  oi-ganized  and  operated  for 
mutual  pui'poses  and  Avithout  profit  are  exempt.  Credit  unions  such  as  those 
organized  under  the  laws  of  Massachusetts,  being  in  substance  and  in  fact 
the  same  as  cooperative  banks,  are  likewise  exempt  from  tax.  (Art.  515, 
Reg.    62.) 

(5)  Cemetery  companies  owned  and  operated  exclusively  for  the 
benefit  of  their  members  or  which  are  not  operated  for  profit;  and 


CAPITAL   STOCK    TAX   UXDER   REVENUE   ACT.  OF    1921.  15 

any  corporation  chartered  solely  for  burial  purposes  as  a  cemetery 
corporation  and  not  permitted  bj'-  its  charter  to  engage  in  any  busi- 
ness not  necessarily  incident  to  that  purpose,  no  part  of  the  net  earn- 
ings of  which  inures  to  the  benefit  of  any  private  stockholder  or 
individual : 

A  cemetery  company  in  order  to  be  exempt  must  be  owned  and  operated 
exclusively  for  tlie  benefit  of  its  lot  owners  or  must  not  be  oi^erated  for 
profit.  Any  cemetery  corporation  chai'tered  solely  for  burial  purposes  and 
not  perraittetl  by  its  charter  to  ens'af::e  in  any  business  not  necessarily  in- 
cident to  that  puriwse,  no  part  of  the  net  earnings  of  ^Yhich  inures  to  the 
benefit  of  any  private  stockholder  or  individual,  is  exempt  from  income  tax. 
A  cemetery  comptiny  of  which  all  lot  owners  are  ^members,  issiiing  pre- 
ferred stock  entitling  the  hohh^r  to  a  senriannual  dividend  of  4  per  cent, 
and  whose  articles  of  incoriwration  provide  that  the  preferred  f^tock  shall 
be  retire<l  a*^  i^ar  as  soon  as  sufficient  funds  are  realized  from  sales  and 
tliat  all  funds  realized  in  addition  thereto  shall  be  used  by  the  company 
'for  the  care  and  improvement  of  the  cemetery  property,  is  within  the 
exemption.      (Art.  516,  Reg.  62.) 

(6)  Corporations,  and  any  community  chest,  fund,  or  foundation, 
organized  and  operated  exclusively  for  religious,  charitable,  scientific, 
literary,  or  educational  purposes,  or  for  the  prevention  of  cruelty  to 
children  or  animals,  no  part  of  the  net  earnings  of  which  inures  to  the 
benefit  of  any  private  stockholder  or  individual : 

This  exemption  applies  to  corporations,  associations,  and  community 
chests,  funds,  or  foundations.  In  order  to  be  exempt,  the  organization 
must  meet  three  tests:  (a)  It  nmst  be  organized  and  ©iterated  for  one 
or  more  of  the  .specified  purposes;  (b)  it  must  be  organized  and  operated 
exclusively  for  such  purposes;  and  (c)  no  part  of  its  net  income  must 
inure  to  the  benefit  of  private  stoclvholders  or  individuals. 

(1)  Charitable  corporations  include  an  association  for  the  relief  of 
the  families  of  clergymen,  even  though  the  latter  make  a  contribution 
to  the  fund  established  for  this  purpose;  or  for  furnishing  the  services 
of  trained  nurses  to  persons  unable  to  pay  for  them;  or  for  aiding  the 
general  body  of  litigants  by  improving  the  efficient  administration  of 
justice.  Educational  corporations  may  include  an  association  whose  sole 
purpose  is  the  instruction  of  the  public.  This  is  true  of  an  association  to 
promote  acquaintance  with  the  Spanish  language  and  literature,  althongh 
it  has  incidental  anuLsement  features;  of  an  association  to  increase  knowl- 
edge of  the  civilization  of  another  country;  and  of  a  chautauqua  associa- 
tion whose  prima  i-y  purpose  is  to  give  lectures  on  subjects  useful  to  the 
individual  and  beneficial  to  the  community  and  whose  amusement  fea- 
tures are  incidental  to  this  purpose.  But  associations  formed  to  dis- 
seminate controversial  or  partisan  propaganda  are  not  educational  witiiin 
the  meaning  of  the  statute.  Scientific  corporations  include  an  association 
for  the  scientific  study  of  law,  to  the  end  of  improvement  in  its  admin- 
istration.    (Art.  517,  Reg.  62.) 

A  corporation  organized  and  operated  exclusively  for  the  purpose 
of  maintaining  a  symphony  orchestra  and  giving  musical  concerts, 
the  programs  being  of  an  educational  character,  and  no  part  of  the 


16  CAPITAL  -STOCK    TAX  UNDER  REVENUE   ACT   OF    1921. 

net  earnings  inuring  to  the  benefit  of  any  private  stockholder  or 
individual,  is  organized  for  "  educational  purposes." 

(2)  Where  a  religious  conioratiou  owns  ;i  larj^e  quantity  of  farm  land 
and  works  it,  and  also  manufactures  and  sells  clothing  and  other  articles 
for  profit,  it  is  net  oi>eratetl  exclusively  for  religious  purposes  and  is  not 
exempt,  even  though  its  property  is  held  in  common  and  its  profits  do  not 
inure  to  the  benefit  of  individual  moml)ers  of  the  society. 

(3)  It  does  not  prevent  exemption  that  private  individuals,  for  whose 
benefit  a  charity  is  organized,  receive  the  income  of  the  corporation  or 
association.  The  statute  refers  to  individuals  having  a  personal  and 
private  interest  in  the  activities  of  the  corporation,  such  as  stockholders. 
If,  however,  a  corporation  issues  "  voting  shares,"  which  entitle  the  holders 
upon  the  dissolution  of  the  corporation  to  receive  the  proceeds  of  its  prop- 
erty, including  accumulated  income,  the  right  to  exemption  does  not  exist, 
even  though  the  by-laws  provide  that  the  shareholders  shall  not  receive 
any  dividend  or  other  return  upon  their  shares.      (Art.  517,  Reg.  62.) 

(7)  Business  leagues,  chambers  of  commerce,  or  boards  of  trade, 
not  organized  for  profit  and  no  part  of  the  net  earnings  of  which 
inures  to  the  benefit  of  any  private  stockholder  or  individual : 

A  business  league  is  an  association  of  persons  having  some  common  busi- 
ness interest,  which  limits  its  activities  to  work  for  such  common  in- 
terest and  does  not  engage  in  a  regular  business  of  a  kind  ordinarily  carried 
on  for  profit.  Its  work  need  not  be  similar  to  that  of  a  chamber  of  com- 
merce or  board  of  trade.  The  fact  that  it  engages  in  a  regular  business 
of  a  kind  ordinarily  carried  on  for  profit  but  on  a  cooperative  basis  or  so 
as  to  produce  only  sufficient  income  to  be  self-sustaining,  is  not  ground 
for  exemption.  An  association  engaged  in  furnishing  information  to  pros- 
pective investors,  to  enable  them  to  make  sound  investments,  is  not  such 
a  league,  since  its  members  have  no  common  business  interest,  and  it  is 
not  exempt,  even  though  all  of  its  income  is  devoted  to  the  purpose  stated. 
A  clearing  house  association,  not  organized  for  profit,  no  part  of  the  net 
income  of  which  inures  to  any  private  stockholder  or  individual,  is  exempt 
provided  its  activities  are  limited  to  the  exchange  of  checks  and  similar 
work  for  the  common  benefit  of  its  members.  An  association  of  persons 
who  are  engaged  in  the  business  of  carrying  freight  and  passengers  by 
boats  propelled  by  steam,  which  is  designed  to  promote  the  legitimate 
objects  of  such  business,  and  all  of  the  income  of  which  is  derived  from 
membership  dues  and  is  expended  for  office  expenses  and  the  salary  of  a 
secretary-treasurer,  is  exempt  from  tax.  An  incorporated  cotton  exchange 
whose  shares  carry  the  right  to  dividends  is  organized  for  profit  and  is 
not  exempt.     (Art.  518,  Reg.  62.) 

(8)   Civic  leagues  or  organizations  not  organized  for  profit  but 
operated  exclusively  for  the  promotion  of  social  welfare : 

A  corporation  having  capital  stock  and  possessing  a  charter  which  author- 
izes it  to  buy,  improve,  and  sell  real  estate  is  organized  for  profit  within 
the  meaning  of  the  statute  and  is  not  exempt  from  tax  as  a  civic  league  or 
organization,  even  though  it  no  longer  exercises  such  powers  for  profit  and 
is  operated  exclusively  for  the  promotion  of  social  welfare.  (Art.  519, 
Reg.  62.) 


CAPITAL   STOCK    TAX   UNDER   EEVElSrUE    ACT   OF    1921.  17 

(9)  Clubs  organized  and  operated  exclusively  for  pleasure,  recrea- 
tion, and  other  nonprofitable  purposes,  no  part  of  the  net  earnings  of 
which  inures  to  the  benefit  of  any  private  stockholder  or  member : 

The  exemption  applies  to  practically  all  social  and  recreation  clubs  whicli 
are  support-ed  by  membership  fees,  dues,  and  assessments.  If  a  club,  by 
reason  of  the  comprehensive  powers  granted  in  its  charter,  engages  in 
traffic,  in  agriculture  or  horticulture,  or  in  the  sale  of  real  estate,  timber, 
etc.,  for  profit,  such  club  is  not  organized  and  operated  exclusively  for 
pleasure,  recreation,  or  social  purposes,  and  any  profit  realized  from  such 
activities  is  subject  to  tax.      (Art.  520,  Reg.  62.) 

(10)  Farmers'  or  other  mutual  hail,  cyclone,  or  fire  insurance  com- 
panies, mutual  ditch  or  irrigation  companies,  mutual  or  cooperative 
telephone  companies,  or  like  organizations  of  a  purely  Iqcal  character, 
the  income  (A  which  consists  solely  of  assessments,  dues,  and  fees 
collected  from  members  for  the  sole  purpose  of  meeting  expenses. 

It  is  necessary  to  exemption  of  organizations  mentioned  in  the 
foregoing  subsection  (other  than  insurance  companies,  all  of  which 
are  exempt)  that  the  income  of  the  company  be  derived  solely  from 
assessments,  dues,  and  fees  collected  from  members. 

If  income  is  received  from  other  sources,  such  as  cash  premiums  or  pre- 
mium deposits,  the  corporation  is  not  exempt,  even  though  its  additional 
income  is  tax  exempt.  Income,  however,  from  sources  other  than  those 
specified  does  not  prevent  exemption  where  its  receipt  is  a  mere  incident  of 
the  business  of  the  company.  Thus  the  receipt  of  interest  upon  a  working 
bank  balance,  or  of  the  proceeds  of  the  sale  of  badges,  office  supplies  or 
equipment,  will  not  defeat  the  exemption.  The  same  is  true  of  the  receipt  of 
interest  upon  Liberty  bonds,  where  they  were  purchased  as  a  patriotic  duty 
and  were  afterwards  sold.  Where,  however,  such  bonds  are  bought  as  a 
permanent  investment,  the  receipt  of  the  interest  destroys  the  exemption. 
*  *  *  The  exemption  does  not  include  a  telephone  clearing  association, 
whose  business  is  to  apportion  toll  rates  between  independent  telephone 
companies  handling  the  same  calls  and  whose  income  consists  of  compensa- 
tion paid  by  such  companies  and  receipts  from  the  sale  of  form  blanks.  The 
phrase  "  of  a  purely  local  character  "  qualifies  all  the  organizations  enumer- 
ated in  subdivision  (10)  of  section  231.  An  organization  of  a  "  purely  local 
character  "  is  one  whose  business  activities  are  confined  to  a  particular  com- 
munity, place,  or  district,  irrespective,  however,  of  political  subdivisions. 
The  word  "purely"  intensifies  and  limits  "local,"  and  indicates  a  clear 
intention  on  the  part  of  Congress  to  exempt  from  taxation  only  such  organi- 
zations as  are  entirely  and  unqualifiedly  "  local  "  in  their  operations.  (Art. 
521,  Keg.  G2.) 

(11)  Farmers,  fruit  growers,  or  like  associations,  organized  and 
operated  as  sales  agents  for  the  purpose  of  marketing  the  products 
of  members  and  turning  back  to  them  the  proceeds  of  sales,  less  the 
necessary  selling  expenses,  on  the  basis  of  the  quantity  of  produce 
furnished  by  them ;  or  organized  and  operated  as  purchasing  agents 
for  the  purpose  of  purchasing  supplies  and  equipment  for  the  use  of 


18  CAPITAL  STOCK    TAX   UNDER  EEVENUE    ACT   OE    1921. 

members   and    tuniinu:  over  such   supplies   and   equii)ment   to  such 
members  at  actual  cost,  plus  necessary  expenses : 

(a)  Cooperative  associations,  acting  as  sales  agents  for  farmers,  fruit 
growers,  dairymen,  etc.,  and  turning  back  to  them  the  proceeds  of  the  sales, 
less  the  necessary  selling  expenses,  on  the  basis  of  the  produce -furnished 
l>y  them,  are  exemi)t  from  income  tax.  Thus  coop<>rative  dairy  companies, 
which  are  engaged  in  collecting  milk  and  disposing  of  it  or  the  products 
thereof  and  distributing  the  proceeds,  less  necessary  operating  expenses, 
among  their  members  upon  the  basis  of  the  quantity  of  milk  or  of  butter 
fat  in  the  millv  furnished  by  such  members,  are  exempt  from  the  tax.  If 
the  proceeds  of  tlie  business  are  distributed  in  any  other  waj*  than  on  such  a 
proportionate  basis,  or  if  the  association  deducts  more  than  necessary  sell- 
ing expenses,  it  does  not  meet  the  requirements  of  the  statute  and  is  not 
exempt.  The  maintenance  of  a  reasonable  reserve  for  depreciation  or  pos- 
sible losses  "or  a  reserve  required  l)y  State  statute  will  not  necessarily  de- 
stroy the  exemption.  A  corporation  organized  to  act  as  a  sales  agent  for 
farmers  and  having  a  capital  stock  on  which  it  pays  a  fixed  dividend 
amounting  to  the  legal  rate  of  interest,  all  of  the  capital  stock  being  owned 
by  such  farmei-s,  will  not  for  that  reason  be  denied  exemption. 

(b)  Cooperative  associations  organized  and  operated  as  purchasing 
agents  for  farmers,  fruit  growers,  dairymen,  etc.,  for  the  purpose  of  buying 
supplies  and  eciuipment  for  the  iise  of  members  and  turning  over  such 
supplies  and  equipment  to  members  at  actual  cost,  plus  necessary  expenses, 
are  also  exempt.  In  order  to  be  exempt  under  either  (a)  or  (b)  an  as- 
sociation must  establish  that  it  has  no  net  income  for  its  own  account.  An 
association  acting  both  as  a  sales  and  a  purchasing  agent  is  exempt  if  as  to 
each  of  its  functions  it  meets  the  requirements  of  the  statute.  (Art. 
522,  Reg.  62.) 

(12)  Corporations  oro:anized  for  the  exclusive  purpose  of  holding 
title  to  property,  collecting  income  therefrom,  and  turning  over  the 
entire  amount  thereof,  less  expenses,  to  an  organization  which  itself 
is  exempt  from  the  tax  imposed  by  this  title. 

(13)  Federal  land  banks  and  national  farm-loan  associations  as 
provided  in  section  26  of  the  act  approved  July  17,  1916,  entitled 
"An  act  to  provide  capital  for  agricultural  development,  to  create 
standard  forms  of  investment  based  upon  farm  mortgage,  to  equalize 
rates  of  interest  upon  farm  loans,  to  furnish  a  market  for  United 
States  bonds,  to  create  Government  depositaries  and  financial  agents 
for  the  United  States,  and  for  other  purposes." 

Joint  stock  land  banks  created  under  the  Federal  farm  loan  act  of 
July  17,  1916,  are  not  exempt  under  this  section. 

(14)  Personal  service  corporations.  This  subdivision  shall  not  be 
in  effect  after  December  31,  1921. 

Personal  service  corporations  so  classified  under  the  Ke venue  Act 
of  1918  are  exempt  from  capital-stock  tax  for  the  taxable  period 
Jul}^  1,  1921,  to  June  30,  1922,  but  are  liable  to  capital-stock  tax  the 
same  as  other  corporations  effective  July.l,  1922,  under  the  Revenue 
Act  of  1921. 


CAPITAL   STOCK    TAX   UNDER   REVENUE   ACT   OF    1921.  19 

Art.  30.  Claims  for  exemption. — It  may  be  stated  generally  that  in 
all  claims  for  exemption  under  the  act,  it  is  necessary  that  the  claim- 
ant establish  to  the  satisfaction  of  the  commissioner  that  it  is  in  prac- 
tice actually  opemied  in  an  exempt  manner.  In  those  cases  falling 
under  paragraphs  of  the  statute  requiring  that  the  organization  be 
"  organized "'  or  "  organized  and  operated  "  in  the  manner  specified 
it  is  necessary  also  that  the  claimant  establish  to  the  satisfaction  of 
the  commissioner  that  it  is  so  organized.  The  term  "  organized,"  as 
thus  used,  refers  to  the  real  substance  and  intent  of  the  organization 
and  not  its  mere  form.  In  determining  the  real  substance  and  intent 
of  the  organization  the  provisions  of  the  charter  and  by-laws  are  not 
in  themselves  conclusive,  but  only  prima  facie  evidence  giving  rise 
to  presumptions  according  to  their  terms.  The  burden  is  upon  the 
claimant  to  ovSrcome  these  presumptions  by  extraneous  evidence  to 
the  satisfaction  of  the  commissioner. 

Art.  31.  Return  by  corporation  claiming'  exemption. — As  corpora- 
tions are  generally  organized  to  do  business  every  existing  company 
is  presumed  to  be  subject  to  the  tax  unless  satisfactory  evidence  is 
submitted  showing  that  it  is  exempt.  Corporations  claiming  ex- 
emption should  fill  out  Form  707  but  instead  of  computing  the  tax 
should  enter  in  the  space  provided  for  the  computation  the  notation 
"  Exemption  claimed."  In  all  such  cases  the  return  so  filled  out 
must  be  filed  with  the  collector,  together  with  a  comprehensive  state- 
ment of  the  reasons  for  claiming  exemption. 

If  exemption  has  been  allowed  for  the  preceding  taxable  year  and 
there  has  been  no  change  in  the  status  or  conditions  of  the  company 
then  the  first  13  lines  of  Form  707  should  be  completed  and  a  state- 
ment attached  to  the  effect  that  exemption  is  claimed  for  the  same 
reasons  as  for  the  previous  year  and  that  the  same  status  and  con- 
ditions of  the  company  exist  for  the  taxable  period  in  question.  In 
this  way  the  records  of  the  collectors'  offices  will  be  complete  and 
corporations  will  avoid  requests  for  the  filing  of  returns  and  un- 
necessary correspondence.  The  determination  of  liability  rests  with 
the  Commissioner  of  Internal  Revenue  and  without  complete  in- 
formation it  is  impossible  to  make  a  decision. 

ELECTION  TO  BE  TAXED  AS  CORPORATION. 

Skc  229.  That  in  the  case  of  the  oraanization  as  a  corporation  within 
four  months  after  the  passage  of  this  act  of  any  trade  or  husiness  in  which 
capital  is  a  material  income-producing  factor,  and  which  was  previously 
owned  by  a  partnership  or  indivi<hial,  the  net  income  of  such  trade  or 
business  from  .Tanuary  1,  1921,  to  the  date  of  such  organiziation  may  at  the 
option  of  the  individual  or  partnership  l)e  taxed  as  tlie  net  income  of 
a  corporation  is  taxed  under  Titles  II  and  III;  in  which  event  the  net 
income  and  invested  capital  of  such  trade  or  Inisiness  shall  be  computed 
as  if  sucli  corporation  had  been  in  existence  on  and  after  .January  1,  1921, 


20  CAPITAL   STOCK    TAX   UNDER   REVENUE    A(^T   OF   1021. 

and  the  undistributed  profits  or  earninss  of  such  trade  or  business  shall 
not  be  subject  to  the  surtaxes  imposed  in  section  211,  but  amounts  dis- 
tributed on  and  after  January  1,  1921.  from  the  earnings  or  profits  of  such 
trade  or  business  accumulated  after  Deceml)er  31,  1920,  shall  be  taxed  to 
the  recipients  as  dividends;  and  all  the  provisions  of  Titles  II  and  III 
relating  to  corporations  shall  so  far  as  practicable  apply  to  such  trade  or 
business :  Provided,  That  this  section  shall  not  apply  to  any  trade  or  busi- 
ness, the  net  income  of  which  for  the  taxable  year  1921  was  less  than  20 
per  centum  of  its  invested  capital  for  such  year:  Provided  further,  That 
any  taxpayer  who  takes  advantage  of  this  section  shall  pay  the  tax  im- 
posiMl  by  section  1000  of  the  Revenue  Act  of  191S  as  if  such  taxpayer  had 
been  a  corporation  on-  and  after  January  1,  1921. 

Art.  82.  Election  to  be  taxed  as  a  corporation. — In  the  event  a  busi- 
ness enterprise  qualifies  under  the  above  provisions  and  elects  to  be 
taxed  under  Titles  II  and  III  as  a  corporation,  then  it  is  required 
to  file  capital  stock  tax  returns  and  pay  the  tax  for  the  six  months' 
period,  January  1  to  June  30,  1921,  and  the  12  months'  period,  July 
1,  1921,  to  June  30,  1922.  The  valuations  for  the  first  mentioned 
period  will  be  reported  as  of  December  31,  1920.  The  values  for 
the  last  mentioned  -period  will  be  reported  as  of  June  30,  1921. 

The  clauses  of  section  1000  of  the  Revenue  Act  of  1918,  which 
require  that  a  corporation  must  have  been  engaged  in  business  some 
part  of  the  year  preceding  the  taxable  period  in  order  to  be  liable 
for  the  tax,  are  not  applicable  to  corporations  filing  returns  under 
the  provisions  of  section  229,  of  the  Revenue  Act  of  1921. 

RETURNS  PUBLIC  RECORDS. 

Sec.  1000.  (c)  Section  257  shall  apply  to  all  returns  filed  with  the  com- 
nussioner  for  purposes  of  the  tax  imposed  by  this  section. 

Sec.  257.  That  returns  upon  which  the  tax  has  been  determined  by  the 
Commissioner  shall  constitute  public  records;  but  they  shall  be  open  to 
inspection  only  upon  order  of  the  President  and  under  rules  and  regulations 
prescribed  by  the  Secretary  and  approved  by  the  President :  Provided, 
That  the  proper  officers  of  any  State  imposing  an  income  tax  may,  upon 
the  request  of  the  governor  thereof,  have  access  to  the  returns  of  any 
cori)oi"ition,  or  to  an  abstract  thereof  showing  the  name  and  income  of 
the  corporation,  at  such  times  and  in  such  manner  as  the  Secretary  may 
prescribe :  Provided  further,  That  all  bona  fide  stockholders  of  record 
owning  1  per  centum  or  more  of  the  outstanding  stock  of  any  corporation 
shall,  upon  making  request  of  the  Commissioner,  be  allowed  to  examine  the 
annual  income  returns  of  such  corporation  and  of  its  subsidiaries.  Any 
stockholder  who  pursuant  to  the  provisions  of  this  section  is  allowed  to 
examine  the  return  of  any  corporation,  and  who  makes  known  in  any 
.  manner  whatever  not  provided  by  law  the  amount  or  source  of  income, 
profits,  losses,  expenditures,  or  any  particular  thereof,  set  forth  or  disclosed 
in  any  such  return,  shall  be  guilty  of  a  misdemeanor  and  be  punished  by 
a  fine  not  exceeding  $1,000,  or  by  imprisonment  not  exceeding  one  year, 
or  both. 


CAPITAL  STOCK    TAX  UN-DER  REVENUE   ACT   OF   1921.  21 

The  Commissioner  sliall  as  soon  as  practicable  in  each  year  cause  to 
be  prepared  and  made  available  to  public  inspection  in  such  manner  as 
he  may  determine,  in  the  office  of  the  collector  in  each  internal-revenue 
district  and  in  such  other  places  as  he  may  determine,  lists  containing 
the  names  and  the  post-office  addresses  of  all  individuals  making  iucome- 
tax  returns  in  such  district. 

Art.  33.  Inspection  of  returns. — The  returns  upon  which  the  tax 
has  been  determined  by  the  commissioner,  although  public  records, 
are  in  general  open  to  inspection  only  to  the  extent  authorized  by  the 
President.  All  bona  fide  stockholders  of  record  owning  1  per  cent  or 
more  of  the  outstanding  stock  of  any  corporation  shall,  upon  making 
request  of  the  commissioner,  be  allowed  to  examine  the  annual  in- 
come returns  of  such  corporations  and  of  its  subsidiaries,  but  such 
privilege  of  e:?amination  is  personal  and  can  not  by  power  of  attorney 
be  delegated  by  the  stockholder  to  another.  Only  such  officers  of 
any  State  as  are  charged  with  the  enforcement  of  a  State  income  tax 
law  shall  have  access  to  the  returns  of  any  corporation,  or  to  an 
abstract  thereof  showing  the  name  and  income  of  the  corporation, 
at  such  times  and  in  such  manner  as  the  secretary  may  prescribe, 
and  then  only  in  case  the  information  is  to  be  used  b}^  them  in  con- 
nection with  such  enforcement.  Any  stockholder  who  is  allowed 
to  examine  the  return  of  any  corporation,  and  who  makes  known 
in  any  manner  whatever  not  provided  by  law  the  amount  or  source 
of  income,  profits,  losses,  expenditures,  or  any  particular  thereof, 
set  forth  or  disclosed  in  any  such  return,  shall  be  guilty  of  a  mis- 
demeanor and  be  punished  by  a  fine  not  exceeding  $1,000  or  by 
imprisonment  not  exceeding  1  year,  or  both.  See  Treasury  Decisions 
2961,  29C2,  3273,  and  3277  for  full  particulars. 

Art.  34.  No  authority  for  credit  of  excess  payment  of  capital  stock 
tax. — Section  252  of  the  Eevenue  Act  of  1921  provides  for  a  credit 
against  additional  income  taxes  due  to  previous  overpayments  of 
income  or  excess-profits  taxes.  The  law  does  not  authorize  the  credit 
of  an  excess  payment  of  capital  stock  tax  for  a  given  period  against 
an  assessment  of  the  same  or  other  tax  for  a  previous  or  subsequent 
period.  A  claim  for  abatement  or  refund  for  the  excess  assessment 
should  be  filed  and  payment  made  of  the  correct  tax  due  for  the  pre- 
vious or  subsequent  period. 

LAWS  MADE  APPLICABLE. 

Sec.  1300.  That  all  administrative,  special,  or  stamp  provisions  of 
law,  including  the  law  relating  to  the  assessment  of  taxes,  so  far  as 
applicable,  are  hereby  extended  to  and  made  a  part  of  this  Act,  and 
every  iierson  liable  to  any  tax  imposed  by  this  Act,  or  for  the  collec- 
tion thereof,  shall  keep  such  records  and  render,  under  oath,  such 
statements  and  returns,  and  shall  comply  with  such  regulations  as 
the  Commissioner,  with  the  approval  of  the  Secretary,  may  from  time 
to  time  prescribe. 


22  CAPITAL  STOCK    TAX   UNDER   REVENUE    ACT   OF    1921. 

EXAMINATION  OF  BOOKS  AND  WITNESSES. 

Sec.  1308.  That  the  Commissioner,  for  the  purpose  of  ascertaining  the 
correctness  of  any  return  or  for  the  purpose  of  making  a  return  where  none 
has  been  made,  is  hereby  authorized,  by  any  revenue  agent  or  inspector 
designated  l)y  him  for  that  purpose,  to  examine  any  bool?:s,  papers,  records, 
or  memoranda  bearing  upon  tlie  matters  required  to  be  included  in  the  re- 
turn, and  may  require  the  attendance  of  tlie  person  rendering  the  return 
or  of  any  officer  or  employee  of  such  person,  or  the  attendance  of  any  other 
person  having  knowledge  in  the  premises,  and  may  take  his  testimony  with 
reference  to  tlie  matter  required  by  law  to  be  includefl  in  such  return,  with 
power  to  administer  oaths  to  such  person  or  persons. 

METHOD  OF  COLLECTING  TAX. 

Sec.  1301.  That  whether  or  not  tlie  method  of  collecting  any  tax  im- 
posed by  Title  *  *  *  X  of  this  Act  is  specifically  provided  therein,  any 
sucli  tax  may,  under  regulations  prescribed  by  the  Commissioner  with  the 
approval  of  the  Secretary,  be  collected  by  slainp,  coupon,  serial-numbered 
ticket,  or  such  other  reasonable  device  or  method  as  may  be  necessary  or 
helpful  in  securing  a  complete  and  prompt  collection  of  the  tax.  All  ad- 
ministrative and  penalty  provisions  of  Title  XI,  in  so  far  as  applicable, 
shall  apply  to  the  collection  of  any  tax  which  the  Commissioner  determines 
or  prescribes  shall  be  collected  in  such  manner. 

Art.  35.  Time  for  payment  of  tax. — All  assessments  shall  be  made 
by  the  commissioner.  The  collector  shall  witiiin  10  days  after  re- 
ceivino;  any  list  of  taxes  from  the  commissioner  give  notice,  to  each 
corporation  liable  to  pay  any  tax  stated  therein,  to  be  left  at  its  place 
of  business  or  to  be  sent  by  mail,  stating  the  amount  of  such  tax  and 
demanding  payment  thereof.  If  such  corporation  does  not  pay  the 
tax  within  10  daj-s  after  the  service  or  the  sending  by  mail  of  such 
notice,  it  shall  be  the  duty  of  the  collector  to  collect  the  tax  with  a 
penalty  of  5  per  cent  additional,  upon  the  amount  of  the  tax  and  in- 
terest at  the  rate  of  1  per  cent  a  month.  See  section  3184,  Revised 
Statutes.  A  collector  has  no  authority  to  extend  the  time  for  pay- 
ment of  the  tax,  and  any  extension  granted  by  him  will  be  at  his  own 
risk.  All  taxes  are  payable  direct  to  the  collector  of  internal  revenue 
of  the  district  in  which  return  is  filed.  The  collector  may  accept 
pajTiient  of  the  tax  when  the  return  is  filed  as  an  "  advance  collec- 
tion," subject  to  any  adjustment  later  found  necessary,  but  no  cor- 
poration is  required  to  pay  the  tax  until  after  notice  and  demand. 
However,  the  collection  of  the  tax  is  facilitated  where  a  corporation 
transmits  with  the  return  a  check  for  the  amount  of  tax  due.  Tax 
due  from  a  corporation  which  has  liquidated  is  legally  collectible 
from  the  stockholders  or  others  vvho  have  received  its  assets. 


CAPITAL  STOCK    TAX  UNDER   EEVENUE    ACT   OF   1921.  23 

■Art.  36.  Abatement  and  refund  of  taxes, — Section  3220  of  the  Re- 
vised Statutes,  as  amended  by  section  1315  of  the  Kevenue  Act  of 
1921,  provides : 

The  Commissioner  of  Internal  Revenue,  subject  to  regulations  prescribed 
by  the  Secretary  of  the  Treasury,  is  authorized  to  remit,  refund,  and  pay 
back  all  taxes  erroneously  or  illegally  assessed  or  collected,  all  penalties 
collected  Vvitiiout  authority,  and  all  taxes  that  ai>pear  to  be  unjustlj- 
assessed  or  excessive  in  amount,  or  in  any  manner  wrongfully  collected ; 
also  to  repay  to  any  collector  or  deputy  collector  the  full  amount  of  such 
sums  of  money  as  may  be  recovered  against  him  in  any  court,  for  any 
internal  revenue  taxes  collected  by  him,  with  the  cost  and  expenses  of  suit ; 
also  all  damages  and  costs  recovered  against  any  assessor,  assLstant 
assessor,  collector,  deputy  collector,  agent,  or  inspector,  in  any  suit  brought 
against  liim  by  reason  of  anytliing  done  in  the  due  performance  of  his 
ofBcial  duty,  "and  shall  make  report  to  Congress  at  the  beginning  of  each 
regular  session  of  Congress  of  ail  transactions  under  this  section. 

FRAUDULENT  RETURNS. 

Section  3225  of  the  Revised  Statutes,  as  amended  by  section  1323 
of  the  Revenue  Act  of  1921,  provides: 

When  a  second  assessment  is  made  in  case  of  any  list,  statement,  or 
return,  which  in  the  opinion  of  the  collector  or  deputy  collector  was  false 
or  fraudulent,  or  contained  any  understatement  or  luidervaluation,  such 
assessment  shall  not  be  remitted,  nor  shall  taxes  collected  under  such 
assessment  be  refunded,  or  paid  back,  or  recovered  by  any  suit,  unless  it 
is  proved  that  such  list,  statement,  or  return  was  not  willfully  false  or 
fraudulent  and  did  not  contain  any  willful  understatement  or  undervalua- 
tion. 

MEDIUM  OF  PAYMENT  OF  TAX. 

Section  1325  of  the  act  reads  as  follows : 

Sec.  1325.  That  collectors  may  receive,  at  par  with  an  adjustment  for 
accrued  interest,  notes  or  certificates  of  indebtedness  issued  by  the  United 
States  and  uncertified  checks  in  payment  of  income,  war-protits  and  excess- 
profits  taxes  and  any  otlier  taxes  payable  other  than  by  stamp,  during  such 
time  and  under  such  regulations  as  the  Commissioner,  with  the  approval  of 
the  Secretary,  shall  prescribe;  but  if  a  check  so  received  is  not  paid  by  the 
bank  on  which  it  is  drawn  the  person  by  whom  such  check  has  been 
tendere<l  shall  remain  liable  for  the  payment  of  the  tax  and  for  all  legal 
penalties  and  additions  the  same  as  if  such  check  had  not  been  tendered. 

Art.  37.  Payment  of  tax  by  uncertified  checks. — Collectors  may  ac- 
cept uncertified  checks  in  paj^ment  of  taxes,  provided  such  checks 
are  collectible  at  par—that  is,  for  their  full  amount,  witliout  any  de- 
duction for  exchange  or  other  charges.  The  collector  will  stamp  on 
the  face  of  each  check  before  deposit  the  words,  "  This  check  is  in  pay- 
ment of  an  obli'^ation  to  the  United  States  and  must  be  paid  at  par. 


24  CAPITAL,  STOCK   TAX  UNDER  EEVENUE   ACT  OF   1921. 

No  protest,"  with  his  name  and  title.  The  day  on  wliich  the  collector 
receives  the  check  will  be  considered  the  date  of  payment  so  far  as 
the  taxpayer  is  concerned,  unless  the  check  is  returned  dishonored. 
If  one  check  is  remitted  to  cover  the  taxes  of  two  or  more  corpora- 
tions, the  remittance  must  be  accompanied  by  a  letter  of  transmittal 
stating  (a)  the  name  of  the  drawer  of  the  check;  (b)  the  amount 
of  the  check;  (c)  the  amount  of  any  cash,  money  order,  or  other 
instrument  included  in  the  same  remittance;  (d)  the  name  of  each 
corporation  whose  tax  is  paid  by  the  remittance ;  (e)  the  amount  of 
the  payment  on  account  of  each  corporation;  and  (f)  the  kind  of 
tax  paid. 

Art.  38.  Procedure  with  respect  to  dishonored  checks. — If  the  bank 
on  which  any  such  check  is  drawn  shall  refuse  to  pay  it  at  par,  the 
check  shall  be  returned  through  the  depositary  bank  and  be  treated 
in  the  same  manner  as  a  bad  check.  All  expenses  incident  to  the 
attempt  to  collect  such  a  check  and  the  return  of  it  through  the 
depositary  bank  must  be  paid  by  the  drawer  of  the  check  to  the  bank 
on  which  it  is  drawn,  since  no  deduction  can  be  made  from  amounts 
received  in  payment  of  taxes.  See  section  3210  of  the  Eevised 
Statutes.  Any  taxpaj-er  whose  check  is  not  paid  by  the  bank  on 
which  drawn  becomes  liable,  under  the  terms  of  the  law,  for  payment 
of  the  tax  and  for  all  legal  penalties  and  additions,  and  the  collector 
shall  proceed  to  collect  the  same  as  though  no  check  had  been  given. 
A  taxpayer  who  tenders  a  certified  check  in  payment  for  taxes  is  not 
released  from  his  obligation  until  the  check  has  been  paid.  (Act  of 
March  2,  1911,  36  Stat.  965.) 

PENALTIES. 

Sec.  1004.  That  any  person  who  carries  on  any  business  or  occupation 
for  which  a  special  tax  is  imposed  by  sections  1000,  1001,  or  1002,  witliout 
having  paid  the  special  tax  tliorein  provided,  shall,  besides  being  liable  for 
the  payment  of  such  special  tax,  be  subject  to  a  i>enalty  of  not  more  than 
$1,000  or  to  imprisonment  for  not  more  than  one  year,  or  both. 

Art.  39.  Doin^  business  without  payment  of  tax. — Every  corpora- 
tion which  does  business  without  having  paid  the  tax  is  liable  to  a 
penalty  of  $1,000.  A  corporation  paying  the  capital  stock  tax  is 
not  on  that  account  exempt  from  any  occupational  tax. 

Sec.  1302.  (a)  That  any  pei-son  required  under  Titles  *  *  *  x, 
*  *  *,  to  pay,  or  to  collect,  account  for  and  pay  over  any  tax,  or  re- 
quired by  law  or  regulations  made  under  authority  thereof  to  make  a  re- 
turn or  supply  any  information  for  tlie  purposes  of  the  computation,  as- 
sessment, or  collection  of  any  such  tax,  who  fails  to  pay,  collect,  or  truly 
account  for  and  pay  over  any  such  tax,  make  any  such  return  or  supply 
any  such  information  at  the  time  or  times  required  by  law  or  regulation 
shall  in  addition  to  other  penalties  provided  by  law  be  subject  to  a  penalty 
of  not  more  than  .$1,000. 


CAPITAL   STOCK    TAX   UNDER  EEVENTJE   ACT   OF   1921.  25 

(b)  Ally  person  who  willfully  refuses  to  pay,  collect,  or  truly  account 
for  and  pay  over  any  sucli  tax,  make  such  return  or  supply  such  informa- 
tion at  the  time  or  times  required  by  law  or  regulation,  or  who  willfully 
attempts  in  any  manner  to  evade  such  tax,  shall  be  guilty  of  a  mis- 
demeanor and  in  addition  to  other  penalties  provided  by  law  shall  be  fined 
not  more  than  $10,000  or  imprisoned  for  not  more  than  one  year,  or  both, 
together  with  the  costs  of  prosecution. 

(c)  Any  person  who  willfully  refuses  to  pay,  collect,  or  truly  account 
for  and  pay  over  any  such  tax  shall  in  addition  to  other  penalties  pro- 
vided by  law  be  liable  to  a  penalty  of  the  amount  of  the  tax  evaded,  or  not 
paid,  collected,  or  accounted  for  and  paid  over,  to  be  assessed  and  collected 
in  tiie  same  manner  as  taxes  are  assessed  and  collected :  Provided,  lioiocver. 
That  no  penalty  shall  be  assessed  under  this  subdivision  for  any  offense  for 
which  a  penalty  may  be  assessed  under  authority  of  section  3176  of  the 
Revised  Statutes,  as  amended,  or  for  any  offense  for  which  a  penalty  has 
been  recovered  under  section  3256  of  the  Revised  Statutes. 

(d)  The    term    "person"    as    used    in    this   section    includes    an   officer 
'or  employee  of  a  corporation  or  a  member  or  employee  of  a  partnership, 

who  as  such  officer,  employee,  or  member  is  under  a  duty  to  perform  the  act 
in  respect  of  which  the  violation  occurs. 

Art.  40.  Penalty  for  nonpayment  of  tax. —  (a)  Any  corporation 
which  fails  to  pay  the  tax  when  due  and  payable  is  liable  to  a  penalty 
of  $1,000.  If  it  willfully  refuses  to  pay  or  willfully  attempts  to 
evade  the  tax,  it  is  liable  also  to  a  fine  of  $10,000  and  costs  and  to  a 
100  per  cent  penalty  to  be  added  to  the  tax.  See  also  article  39, 
(b)  Any  officer  or  employee  of  a  corporation  Avho  in  the  course  of 
his  duty  fails  to  pay  the  tax  when  due  and  payable  is  liable  to  a 
penalty  of  $1,000.  If  he  willfully  refuses  to  pay  or  willfully  at- 
tempts to  evade  the  tax,  he  is  liable  also  to  a  fine  of  $10,000  and  costs 
and  to  imprisonment  for  a  year,  and  to  a  penalty  of  the  amount  of 
the  tax  unpaid  or  evaded. 

Art.  41.  Penalties  for  failure  to  make  return  and  for  false  return. — 
Any  corporation  M'hich  fails  to  make  a  return  within  the  required 
time  is  liable  to  a  penalty  of  $1,000.  If  it  willfully  refuses  to  make 
a  return  it  is  liable  also  to  a  fine  of  $10,000  and  costs. 

Any  officer  or  employee  of  a  corporation  who  in  the  course  of  his 
duty  fails  to  make  a  return  within  the  required  time  is  liable  to  a 
penalty  of  $1,000.  If  he  willfully  refuses  to  make  a  return  he  is 
liable  also  to  a  fine  of  $10,000  and  costs  and  to  imprisonment  for  a 
year. 

In  case  of  failure  to  file  a  return  on  time,  a  penalty  of  25  per  cent 
of  the  amount  of  the  tax  is  added  to  it  unless  the  return  is  later 
filed  and  failure  to  file  it  within  the  prescribed  time  is  satisfactorily 
shown  to  the  Commissioner  to  be  due  to  a  reasonable  cause  and  not 
to  Avillful  nejL^lect.  This  penalty  is  imposed  by  section  3176  of  the 
Revised  Statutes  as  amended.  Two  classes  of  delinquents  are  liable 
to  this  penalty:   (a)   Those  who  do  not  file  returns  and  for  whom 


26  CAPITAL   STOCK    TAX   UNDER  RFA'ENUE   ACT   OF    li>21. 

rctimis  are  made  by  the  collector  or  commissioner;  and  (b)  those 
■who  file  tardy  returns  and  are  unable  to  show  reasonable  cause  for 
the  delay.  A  taxpayer  who  files  a  tardy  return  and  wishes  to  avoid 
the  penalty  must  make  an  affirmatiA'e  showing  of  all  the  facts  alleged 
as  a  reasonable  o:iuse  for  failure  to  file  the  return  on  time  in  the 
form  of  an  affidavit,  which  should  be  attached  to  the  return.  If  such 
an  affidavit  is  furnished  with  the  retrnn  or  upon  th«  collector's  de- 
mand, the  collector,  unless  otherwise  directed  by  the  commissioner, 
will  forward  the  affidavit  Avith  the  I'eturn,  and  if  the  commissioner 
determines  that  the  delinquency  was  due  to  a  reasonable  cause  and 
not  to  willful  neglect  the  25  per  cent  ]ienalty  w^ill  not  be  assessed. 
If  the  taxpayer  exercised  ordinary  business  care  and  prudence  and 
was  nevertheless  unable  to  file  the  return  in  the  prescribed  time, 
then  the  delay  is  due  to  "  reasonable  cause." 

UNNECESSARY  EXAMINATIONS. 

Sec.  1309.  That  no  taxpayer  shall  he  subjecte^l  to  unnecessary  exami- 
nations or  investigations,  and  only  one  inspection  of  a  taxpayer's  Iwjolcs 
of  aeconnt  shall  be  made  for  each  taxable  year  unless  the  taxpayer 
I'eqiiests  otherwise  or  unless  the  Commissioner,  after  investigation,  noti- 
fies the  taxpayer  in  writinii'  that  an  add'tioiial   inspection  is  necessary. 

JURISDICTION  OF  COURTS. 

Sec.  1310.  (a)  That  if  any  person  is  summoned  under  this  Act  to 
appear,  to  testify,  or  to  produce  books,  papers  or  other  data,  the  district 
court  of  the  United  States  for  the  district  in  wliicli  such  person  resides 
shall  have  jurisdiction  by  appropriate  process  to  compel  such  attend- 
ance, testimony,  or  protluction  of  books,  papers,  or  otiier  data. 

(b)  The  district  courts  of  the  United  States  iit  the  instajace  of  the 
United  States  are  hereby  invested  with  such  jurisdicfon  to  make  and 
issue^  both  in  actions  at  law  and  suits  in  equity,  writs  and  orders  of 
injunction,  ancl  of  ne  exeat  republica,  orders  appointius  receivers,  and 
such  other  orders  and  process,  and  to  render  such  judgments  and  deci'ees, 
granting  in  proper  cases  both  legal  and  equitable  relief  together,  as  may 
be  necessary  or  appi'opriate  for  the  enforcement  of  the  provisions  of  this 
Act.  The  remedies  hereby  provided  are  in  addition  to  and  not  exclusive 
of  any  and  all  otlier  remedies  of  the  United  States  in  such  courts  or 
otherwise  to  enforce  such  provi.sions. 

(c)  Paragraph  twentieth  of  section  24  of  the  Judicial  Code  is  amended 
by  fiddiiig  at  tlie  end  thereof  the  following  new  paragraph : 

"  Concurrent  with  the  Court  of  Claims,  of  any  suit  or  proceeding,  com- 
menced after  the  passage  of  the  Revenue  Act  of  1921,  for  the  recovery  of 
any  internal-revenue  tax  alleged  to  have  been  erroneously  or  illegally 
assessed  or  collected,  or  of  any  penalty  claimed  to  have  been  collected 
without  aiithority  or  any  sum  alleged  to  have  been  excessive  or  in  any 
manner  wrongfully  collected,  under  the  internal-revenue  laws,  even  if  the 
cia'm  exceeds  $10,000.  if  the  collector  of  internal-revenue  by  whom  such 
tax.  penalty,  or  sum  was  collected  is  dead  at  the  time  such  suit  or  pro- 
ceeding is  commenced."  * 


aVPITAL  STOCK   TAX  UNDER  REVEIfUE   ACT   OF   1921.  27 

AMENDMENTS  TO  REVISED  STATUTES. 

Sec.  1311.  That  sections  3164,  31G5,  3167,  3172,  3173,  and  3176  of  the 
Revised  Statutes,  as  amended,  are  reenacted,  without  change,  as  lollows : 

COLLECTOR  TO  REPORT  WILLFUL  VIOLATIONS. 

"  Sec.  3164.  It  shall  be  the  duty  of  every  collector  of  internal  revenue 
having  knowledge  of  any  willful  violation  of  any  law  of  the  United  States 
relating  to  the  revenue,  within  thirty  days  after  coming  into  possession 
of  such  knowledge,  to  file  with  the  district  attorney  of  the  district  in 
which  any  fine,  penalty,  or  forfeiture  may  be  incurred,  a  statement  of  all 
the  facts  and  circumstances  of  the  case  within  his  knowledge,  together 
with  the  names  of  the  witnesses,  setting  forth,  the  provisions  of  law  be- 
lieved to  be  so  violated  on  which  reliance  may  be  had  for  condemnation 
©r  conviction* 

POWERS  OF  REVENUE  OFFICERS. 

"  Sec.  3165.  Every  collector,  deputy  collector,  internal-revenue  agent, 
and  internal-revenue  officer  assigned  to  duty  under  an  internal-revenue 
agent,  is  authorized  to  administer  oaths  and  to  take  evidence  touching  any 
part  of  the  administration  of  the  internal-revenue  laws  with  which  he  is 
charged,  or  where  such  oaths  and  evidence  are  authorized  by  law  or  regu- 
lation authorized  by  law  to  be  taken. 

PENALTIES  FOR  UNLAWFUL  DISCLOSURES. 

"  Sec.  3167.  It  shall  be  unlawful  for  any  collector,  deputy  collector, 
agent,  clerk,  or  other  officer  or  employee  of  the  United  States  to  di- 
vulge or  to  make  known  in  any  manner  whatever  not  provided  by  law 
to  any  i^erson  the  operations,  style  of  work,  or  apparatus  of  any 
manufacturer  or  producer  visited  by  him  in  the  discharge  of  his 
official  duties,  or  the  amount  or  source  of  income,  profits,  losses,  ex- 
penditures, or  any  particular  thereof,  set  fortli  or  disclosed  in  any  in- 
come return,  or  to  permit  any  income  return  or  copy  tiiereof  or  any 
book  containing  any  abstract  or  particulars  thereof  to  be  seen  or  ex- 
amined by  any  person  except  as  provided  by  law ;  and  it  shall  be  un- 
lawful for  any  person  to  print  or  publisli  in  any  manner  whatever 
not  provided  by  law  any  income  return,  or  any  part  thereof  or  source 
of  income,  profits,  losses,  or  expenditures  appearing  in  any  income 
return;  and  any  offense  against  the  foregoing  provision  shall  be  a 
misdemeanor  and  be  punislietl  by  a  fine  not  exceeding  $1,000  or  by  im- 
prisonment not  exceeding  one  year,  or  both,  at  the  discretion  of  tlie 
court ;  and  if  the  offender  be  an  officer  or  employee  of  the  United  States 
he  shall  be  dismissed  from  office  or  discharged  from  employment. 

CANVASS  FOR  TAXABLE  PERSONS  AND  OBJECTS. 

"  Sec.  3172.  Every  collector  shall,  from  time  to  time,  cause  his 
deputies  to  proceed  through  every  part  of  his  district  and  inquire  after 
and  concerning  all  persons  therein  who  are  liable  to  pay  any  interaal- 
revenue  tax,  and  all  persons  owning  or  hsiving  the  care  and  manage- 
ment of  any  ol^ects  liable  to  pay  any  tax,  and  to  make  a  list  of  such 
persons  and  enumerate  said  objects. 


28  CAPITAL.  STOCK   TAX  UNDER  EEVENUE   ACT  OF   1921. 

RESPONSIBILITIES  OF  PERSONS  LIABLE  TO  TAX. 

"  Skc.  3173.  It  shall  be  the  duty  of  any  person,  partnership,  firm,  asso- 
ciation, or  corporation,  nuule  liable  to  any  duty,  special  tax,  or  other  tax 
imposed  by  law,  when  not  otherwise  pr()^•ide^l  for,  (1)  in  case  of  a  siwH-ial 
tax,  on  or  before  the  thirty-first  day  of  .July  in  each  year,  and  (2)  in  other 
cases  before  the  day  on  which  the  taxes  accrue,  to  make  a  list  or  return, 
verified  by  oath,  to  the  collector  or  a  deputy  collector  of  the  district  where 
locate<l,  of  the  articles  or  objects,  includini;  the  quantity  of  goods,  wares, 
and  merchandise,  made  or  sold  and  charged  with  a  tax,  the  several  rates 
and  aggregate  amount,  according  to  the  forms  and  regulations  to  be  pre- 
scribed by  the  Commissioner  of  Internal  Revenue,  with  the  approval  of  the 
Secretary  of  the  Treasury,  for  which  such  i^erson,  partnership,  firm,  associa- 
tion, or  corporation  is  liable :  Provided,  That  if  any  ijerson  liable  to  pay 
duty  or  tax,  or  owning,  possessing,  or  having  the  care  or  management  of 
property,  goods,  wares,  and  merchandise,  article  or  objects  liable  to  pay 
any  duty,  tax,  or  license,  shall  fail  to  make  and  exhibit  a  list  or  return 
required  by  law,  but  shall  consent  to  disclose  the  particulars  of  any  and 
all  the  property,  goods,  wares,  and  merchandise,  articles,  and  objects  liable 
to  pay  any  duty  or  tax,  or  any  business  or  occupation  liable  to  pay  any  tax 
as  aforesaid,  then,  and  in  that  case,  it  shall  be  the  duty  of  the  collector  or 
deputy  collector  to  make  such  list  or  return,  which,  being  distinctly  read, 
consented  to,  and  signed  and  verified  by  oath  by  the  person  so  owning,  pos- 
sessing, or  having  the  care  and  management  as  aforesaid,  may  be  received 
as  the  list  of  such  person :  Provided  further,  That  in  case  no  annual  list 
or  return  has  been  rendered  by  such  person  to  tlie  collector  or  deputy  col- 
lector as  required  by  law,  and  the  person  shall  be  absent  from  his  or  her 
residence  or  place  of  business  at  the  time  the  collector  or  a  deputy  collector 
shall  call  for  the  annual  list  or  return,  it  shall  be  the  duty  of  such  collector 
or  deputy  collector  to  leave  at  such  place  of  residence  or  business,  with  some 
one  of  suitable  age  and  discretion,  if  such  be  present,  otherwiise  to  deposit 
in  the  nearest  post  office,  a  note  or  memorandum  addressed  to  such  person, 
requiring  him  or  her  to  render  to  such  collector  or  deputy  collector  the  list 
or  return  required  by  law  within  ten  days  from  the  date  of  such  note  or 
memorandum,  verified  by  oath.  And  if  any  person,  on  being  notified  or  re- 
quired as  aforesaid,  shall  refuse  or  neglect  to  render  such  list  or  return 
within  the  time  required  as  aforesaid,  or  whenever  any  person  who  is  re- 
quired to  deliver  a  monthly  or  other  return  of  objects  subject  to  tax  falls 
to  do  so  at  the  time  required,  or  delivers  any  return  which,  in  the  opinion 
of  the  collector,  is  erroneous,  false,  or  fraudulent,  or  contains  any  under- 
valuation or  understatement,  or  refuses  to  allow  any  regularly  authorized 
Government  officer  to  examine  the  books  of  such  person,  firm,  or  corporation, 
it  shall  be  lawful  for  the  collector  to  summon  such  person,  or  any  other 
person  having  possession,  custody,  or  care  of  books  of  account  containing 
entries  relating  to  the  business  of  such  person  or  any  other  person  he  may 
deem  proper,  to  appear  before  him  and  produce  such  books  at  a  time  and 
place  named  in  the  summons,  and  to  give  testimony  or  answer  interroga- 
tories, under  oath,  respecting  any  objects  or  income  liable  to  tax  or  the  re- 
turns thereof.  The  collector  may  summon  any  person  residing  or  found 
within  the  State  or  Territory  in  which  his  district  lies ;  and  when  the  per- 
.  son  intended  to  be  summoned  does  not  reside  and  can  not  be  found  within 
such  State  or  Territory,  he  may  enter  any  collection  district  where  such 
person  may  be  found  and  there  make  the  examination  herein  authorized. 


CAPITAL   STOCK    TAX   UNDER  EEVENUE   ACT   OF   1921.  29 

And  to  tbis  end  he  may  tliere  exercise  all  the  authority  which  he  might  law- 
fully exercise  in  the  district  for  which  he  was  commissioned  :  Provided,  That 
'  person,'  as  used  in  this  section,  shall  be  construed  to  include  any  cor- 
poration, joint-stock  company  or  association,  or  insurance  company  when 
such  construction  is  necessary  to  carry  out  its  provisions. 

DELINQUENT  RETURNS. 

"  Sec.  317G.  If  any  person,  corporation,  company,  or  association  fails 
to  make  and  file  a  return  or  list  at  the  time  prescribed  by  law  or  by 
regulation  made  under  authority  of  law,  or  makes,  willfully  or  otherwise, 
a  false  or  fraudulent  return  or  list,  the  collector  or  deputy  collector  shall 
make  the  return  or  list  from  his  own  knowledge  and  from  such  informa- 
tion as  he  can  obtain  through  testimony  or  otherwise.  In  any  such  case 
the  Commissioner  may,  from  his  own  knowledge  and  from  such  informa- 
tion as  he  can  obtain  through  testimony  or  otherwise,  make  a  return  or 
amend  any  return  made  by  a  collector  or  deputy  collector.  Any  return 
or  list  so  made  and  subscribed  by  the  Commissioner,  or  by  a  collector  or 
deputy  collector  and  approved  by  the  Commissioner,  shall  be  prima  facie 
good  and  sufficient  for  all  legal  purposes. 

"  If  the  failure  to  file  a  return  or  list  is  due  to  sickness  or  absence,  the 
collector  may  allow  such  further  time,  not  exceeding  thirty  days  for 
making  and  filing  the  return  or  list  as  he  deems  proper. 

"  The  Connnissioner  of  Internal  Revenue  shall  determine  and  assess  all 
taxes,  other  than  stamp  taxes,  as  to  which  returns  or  lists  are  so  made 
under  the  provisions  of  this  section.  In  case  of  any  failure  to  make  and 
file  a  return  or  list  within  the  time  prescribed  by  law,  or  prescribetl  by 
the  Commissioner  of  Internal  Revenue  or  the  collector  in  pursuance  of 
law,  the  Commissioner  of  Internal  Revenue  shall  add  to  the  tax  25  per 
centum  of  its  amount,  except  that  when  a  return  is  filed  after  such  time 
and  it  is  shown  that  the  failure  to  file  it  was  due  to  a  reasonable  cause 
and  not  to  willful  neglect,  no  such  addition  shall  be  made  to  the  tax. 
In  case  a  false  or  fraudulent  return  or  list  is  willfully  made,  the  Commis- 
sioner of  Internal  Revenue  shall  add  to  the  tax  50  per  centum  of  its 
amount. 

"  The  amount  so  added  to  any  tax  shall  be  collected  at  the  same  time 
and  in  the  same  manner  and  as  a  part  of  the  tax  unless  the  tax  has  been 
paid  before  the  discovery  of  the  neglect,  falsity,  or  fraud,  in  which  case 
the  amount  so  added  shall  be  collected  in  the  same  manner  as  the  tax." 

FINAL    DETERMINATIONS    AND    ASSESSMENTS. 

Sec.  1312.  That  if  after  a  determination  and  assessment  in  any  case  the 
taxpayer  has  without  protest  paid  in  whole  any  tax  or  i)enalty,  or  accepted 
any  abatement,  credit,  or  refund  based  on  sucli  determination  and  assess- 
ment, and  an  agreement  is  made  in  writing  between  the  taxpayer  and  the 
Commissioner,  with  the  approval  of  the  Secretary,  that  such  determination 
and  assessment  shall  be  final  and  concUisive,  then  (except  upon  a  showing 
of  fraud  or  malfeasance  or  misrepresentation  of  fact  materially  affecting 
the  determination  or  assessment  thus  made)  (1)  the  case  shall  not  be  re- 
opened or  the  determination  and  assessment  modified  by  any  officer,  em- 
ployee, or  agent  of  the  United  States,  and  (2)  no  suit,  action,  or  proceed- 
ing to  annul,  modify,  or  set  aside  such  determination  or  assessment  shall 
be  entertained  by  any  court  of  the  United  States. 


30  CAPITAL.  STOCK    TAX   XT^s^deR   EEVENUE   ACT   OF   1921. 

ADMINISTRATIVE   REVIEW. 

Sec.  1313.  That  in  the  absence  of  fraud  or  mistake  in  Jiiatliematical 
calculation,  the  findings  of  facts  in  and  the  decision  of  the  Commissioner 
upon  (or  in  case  the  Secretary  is  authorized  to  approve  the  same,  then 
after  sudi  approval)  the  merits  of  any  claim  i)resonte(l  under  or  aulhorizcd 
by  the  internal-revenue  laws  shall  not  be  subject  to  review  by  any  other 
administrative  officer,  employee,  or  agent  of  the  United  States. 

RETROACTIVE  fiEGULATIONS. 

Sec.  1314.  Tha.t  in  «iise  :a  regulation  or  Treasury  decision  relating  to  the 
in ternaJ -revenue  laws  made  by  the  Conunissioner  or  the  Seci'etary,  or  by 
the  Coumiissioner  with  the  approval  of  the  Secretary,  is  reversed  by  a 
subsequent  regulation  or  Treasury  decision,  and  such  reversal  is  Bot  im- 
mediately occasioned  or  required  by  a  4ecision  of  a  court  of  <;ompetent 
jurisdiction,  such  subseciuent  regulation  or  Treasury  decision  may,  in  the 
discretion  of  tlie  Commissiorter,  with  tlte  approval  of  tlie  Secretary,  be 
ai)plied  without  retroactive  effect. 

TIME  FOR  REFUND  OF  CAPITAL  STOCK  TAX. 

Section  3228  of  the  Revised  Statutes  is  amended  by  section  1316 
of  the  act  to  read  as  follows : 

All  claaims  for  the  refunding  or  crediting  of  -any  intemal-reTenne  tax 
alleged  to  have  been  erroneously  or  illegally  fissessed  or  collected,  or  of 
any  penalty  alleged  to  hare  been  collated  without  authority,  or  of  any 
sum  alleged  to  hnve  been  excessive  or  in  any  manner  wrongfully  collected, 
must  'be  presented  to  tlie  Commissioner  of  Internal  Revenue  within  four 
years  next  after  payment  of  such  tax,  penalty,  or  sum. 

This  section,  except  as  modified  by  section  252,  shall  apply  retro- 
actively to  cl-aims  for  refimd  under  the  Revenue  Act  of  1916,  the 
Revenue  Act  of  1917,  and  the  Revenue  Act  of  1918. 

Art.  42.  Section  3228,  R.  S.  (refunds),  retroactive. — This  section  is 
retroactive  in  its  effect.  Any  claim  for  the  refund  of  taxes  or  pen- 
alities illegaJly  assessed  or  collected  under  the  Revenue  Acts  of  1916, 
1917,  or  1918,  reg-ardless  of  whether  or  liot  such  claim  was  barred  in 
whole  or  in  part  at  the  time  of  the  passage  of  this  act  will  be  con- 
sidered on  its  merits  if  presented  within  the  four-year  period  specified 
in  the  foregoing  section. 

LIMITATIONS   UPON   SUITS   AND   PROSECUTIONS. 

Sec.  1318.  That  section  3226  of  the  Revised  Statutes  is  amended  to  read 
as  follows: 

"  Sec.  3226.  No  suit  or  proceeding  shall  l>e  maintained  in  any  court  for 
tlie  recovery  of  any  internal-revenue  tax  alleged  to  have  l>een  erroneously 
or  illegally  assessed  or  collected,  or  of  any  penalty  claimed  to  have  been  col- 
lected without  authority,  or  of  any  sum  alleged  to  have  been  excessive  or  in 
any  manner  wrongfully  collected,  until  a  claim  for  refund  or  credit  has  been 
duly  filed  with  the  Commissioner  of  InterRal  Revenue,   according  to  the 


CAPITAL  STOCK   TAX    UN^DER    EEVESTUE    ACT    OF    1921.  31 

pi'ovisioiis  of  law  in  that  resTird.  and  tlie  rejrulations  of  the  Secretary  of  the 
Treasury  established  iu  pursuance  thereof.  No  such  suit  or  proceeding 
shall  be  begun  before  the  expiration  of  sis  montlis  from  tlie  date  of  Uliug 
such  claim  unless  the  Commissioner  renders  a  decision  thereon  witliin  that 
time,  nor  after  tlie  expiration  of  five  years  from  the  date  of  the  payment 
of  such  tax,  penalty,  or  sum." 

This  section  shall  not  affect  any  suit  or  proceeding  instituted  prior  to  the 
passage  of  this  Act,  but  shall  apply  to  all  .suits  and  proceedings  instituted 
after  the  passage  of  this  Act,  whether  or  not  barred  by  prior  Acts  of 
Congress. 

Sec.  1319.  That  section  3227  of  tlie  Revised  Statutes  is  hereby  i-epealed 
but  sucli  repeal  shall  not  affect  any  suit  or  proceeding  instituted  prior  to  tlie 
passage  of  this  Act. 

Sec.  1320.  That  no  suit  or  proceeding  for  the  collection  of  any  internal 
revenue  tax  shall  be  begun  after  the  expiration  of  five  years  from  the  time 
such  tax  was  due,  except  in  the  case  of  fraud  with  intent  to  evade  tax,  or 
willful  attempt  in  any  manner  to  defeat  or  evade  tax.  This  section  shall  not 
apply  to  suits  or  proceedings  for  the  collection  of  taxes  under  section  2.50 
of  this  Act,  nor  to  suits  or  proceedings  begun  at  the  time  of  the  passage  of 
this  Act. 

Sec.  1321.  (a)  That  the  Act  entitled  "An  Act  to  limit  the  time  within 
which  prosecutions  may  be  instituted  against  persons  charged  with  violat- 
ing internal-revenue  laws,"  approved  July  5,  1884,  is  amended  to  read  as 
follows : 

"  That  no  person  shall  be  prosecuted,  ti'ied,  or  punished  for  any  of  the 
various  offenses  arising  mider  the  internal-revenue  laws  of  the  United 
States  unless  the  indictment  is  found  or  the  iuftu-mation  instituted  within 
three  years  next  after  the  commission  of  the  offense :  Prorided,  That  the 
time  during  which  the  person  committing  the  offense  is  al)sent  from  the 
district  wherein  the  same  is  committed  shall  not  be  taken  as  any  part  of 
the  time  limited  by  law  for  the  commencement  of  such  proceedings:  Pro- 
vided fniHher,  That  the  pj'ovisions  of  this  Act  shaU  not  apply  to  offenses 
conmiitted  prior  to  its  passage:  Provided  further,  That  where  a  complaint 
shall  be  instituted  before  a  commissioner  of  the  United  States  witliin  the 
period  above  limited,  the  time  shall  be  extended  until  the  di.scharge  of  the 
grand  jury  at  its  next  session  within  the  district :  And  provided  further, 
Tliat  this  Act  shall  not  apply  to  offenses  committed  by  officers  of  the 
United  States." 

(b)  Any  prosecution  or  proceeding  under  an  indictment  found  or  infor- 
mation instituted  pi'ior  to  the  passage  of  this  Act  shall  not  .be  affected  in 
any  manner  by  this  amendment,  but  such  prosecution  or  in-oceeding  shall 
be  subject  to  the  limitations  imposed  by  law  prior  to  the  passage  of  this 
Act. 

ASSESSMENTS. 

Sec.  1322.  That  all  internal  revenue  taxes,  except  as  provided  in  section 
250  of  this  Act,  shall,  notwithstanding  the  provisions  of  section  3182  of 
the  Revised  Statutes  or  any  ctther  provision  of  law.  be  assessed  within 
four  years  after  sucli  taxes  became  due,  but  in  the  case  of  fraud  with  in- 
tent to  evade  tax  or  willful  attempt  iu  any  uianuei'  to  defeat  or  evade 
tax.  such  tax  may  be  assessed  at  any  time. 

Art.  48.  Section  1322  R.  S.  (assessments)  i-etroactive. — This  section 
is  retroactive  in  its  effect.     Under  its  terms  capital  stock  taxes  may 


32  CAPITAL   STOCK    TAX   UNDER  REVENUE    ACT   OF   1921. 

be  assessed  at  any  time  within  a  period  of  four  years  after  such  taxes 
became  due,  notwithstanding  the  fact  that  assessment  may  have 
been  barred  by  a  prior  statute  at  the  time  of  passage  of  the  Revenue 
Act  of  1921. 

The  new  period  of  limitation  embodied  in  the  section  also  has  the 
effect  of  extending  for  the  same  period  the  time  within  which  the 
25  per  cent  and  50  per  cent  penalties  imposed  by  section  3176  of  the 
Revised  Statutes  may  be  assessed. 

INTEREST   ON   REFUNDS   AND   JUDGMENTS. 

Sec.  1324.  (a)  That  upon  tlie  allowance  of  a  claim  for  the  refund  of  or 
credit  for  internal  revenue  taxes  paid,  interest  shall  be  allowed  and 
paid  upon  the  total  amount  of  such  refund  or  credit  at  the  rate  of  one- 
half  of  1  per  centum  per  month  to  the  date  of  such  allowance,  as  follows : 
(1)  If  such  amount  was  paid  under  a  specific  protest  setting  forth  in 
detail  the  basis  of  and  reasons  for  such  protest,  from  the  time  when 
such  tax  was  paid,  or  (2)  if  such  amount  was  not  paid  under  protest 
but  pursuant  to  an  additional  assessment,  from  the  time  such  additional 
assessment  was  paid,  or  (3)  if  no  protest  was  made  and  the  tax  was  not 
paid  pursuant  to  an  additional  assessment,  from  six  months  after  the  date 
of  filing  of  such  claim  for  refund  or  credit.  The  term  "  additional  assess- 
ment "  as  used  in  this  section  means  a  further  assessment  for  a  tax  of  the 
same  character  previously  paid  in  part. 

(b)  Section  177  of  the  Judicial  Code  Is  amended  to  read  as  follows: 
"  Sec  177.  No  interest  shall  be  allowe<l  on  any  claim  up  to  the  time  of 
the  rendition  of  judgment  by  the  Court  of  Claims,  unless  upon  a  contract 
expressly  stipulating  for  the  payment  of  interest,  except  that  interest  may 
be  allowed  in  any  judgment  of  any  court  rendered  after  the  passage  of 
the  Revenue  Act  of  1921  against  the  United  States  for  any  internal-rev- 
enue tax  erroneously  or  illegally  assessed  or  collected,  or  for  any  penalty 
collected  without  authority  or  any  sum  which  was  excessive  or  in  any 
manner  wrongfully  collected,  under  the  internal-revenue  laws." 

AUTHORITY   FOR  REGULATIONS. 

Sec  1303.  That  the  Commissioner,  with  the  approval  of  the  Secretary, 
is  hereby  authorized  to  make  all  needful  rules  and  regulations  for  the 
enforcement  of  the  provisions  of  this  Act. 

REPEALS. 

Skc.1400.  (a)  That  the  following  parts  of  the  Revenue  Act  of  1918  are 
repealed,  to  take  effect  (except  as  otherwise  provided  in  this  Act)  on  Jan- 
uary 1,  1922,  subject  to  the  limitations  provided  in  subdivision   (b)  : 

*  *  *  *  *  ♦  .       * 

Title  X  (called  "  Special  Taxes")  ; 

*  ****** 
Sections  1314,  1315,  1316,  1317,  1319,  and  1320  of  Title  XIII   (being  cer- 
tain administrative  provisions)  on  the  passage  of  this  Act. 

(b)   The  parts  of  the  Revenue  Act  of  1918  which  are  repealed  by  this 
Act  shall    (unless  otherwise  specifically  provided  in  this  Act)    remain  in 


CAPITAL   STOCK    TAX   UNDER  REVENUE   ACT  OF   1921.  33 

force  for  the  assessment  and  collection  of  all  taxes  which  have  accrued 
under  the  Revenue  Act  of  191S  at  the  time  such  parts  cease  to  be  in 
effect,  and  for  the  imposition  and  collection  of  all  penalties  or  forfeitures 
which  have  accrued  or  may  accrue  in  relation  to  any  such  taxes.  In  the 
case  of  any  tax  imposed  by  any  part  of  the  Revenue  Act  of  1918  re- 
pealed by  this  Act,  if  there  is  a  tax  imposed  by  this  Act  in  lieu  thereof, 
the  provision  imposing  such  tax  shall  remain  in  force  until  the  correspond- 
ing tax  under  this  Act  takes  effect  under  the  provisions  of  this  Act.  The 
unexpended  balance  of  any  appropriation  heretofore  made  and  now  avail- 
able for  the  administration  of  any  such  part  of  the  Revenue  Act  of  1918 
shall  be  available  for  the  administration  of  this  Act  or  the  corresponding 
provision  thereof. 

Art.  44.  Promulgation  of  regulations. — In  pursuance  of  the  statute 
the  foregoing  regulations  are  hereby  made  and  promulgated  and  all 
rulings  inconsistent  herewith  are  hereby  revoked. 

D.  H.  Blair, 

Commissioner  of  Internal  Revenue. 

Approved  June  15,  1922. 

A.  W.  Mellon, 

Secretary  of  the  Treasury. 


LAW  LIESARY 
t^NlVlLKSiTY  OF  GALEF©RNU 


3AYLORD  BROS   Inc. 
Syracuse,  N.  Y. 
Stockton,  Ca'if. 


fAClUV/,. 


hh 


000  356  558    T^ 


I 

I 


